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International Economic Conditions, Trade Policies, Exchange Rates, and Balance of Payments and Their Influence on LDC Growth

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  • Thomas, Scott

Abstract

When the present value of the assets held by creditors ma firm is not fully recoverable within a reasonable time period, the firm is termed insolvent. Takmg net foreign exchange earnings as receipts and debt service payments as expenditures, this measure of solvency may be applied to the analysis of the creditworthiness of major debtor countries, with the modification that, for a country to be deemed solvent, a principal reschedulingcum- interest deferral scheme must not result (5 years later) in a significantly higher probabiltty of havtng to reschedule. Empirical analysis of several major debtor countries using this methodology leads to the conclusion that interest payments from some countries will not be recoverable (under any feasible scheme to retain the present' value of the debt) without persistent recession. Instead, the prospect for these countries is ltkely to be a pattern of chronic mability to meet debt service obligations and of stagnating or falling gross domestic product.

Suggested Citation

  • Thomas, Scott, 1987. "International Economic Conditions, Trade Policies, Exchange Rates, and Balance of Payments and Their Influence on LDC Growth," 1987 Occasional Paper Series No. 4 197429, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaaeo4:197429
    DOI: 10.22004/ag.econ.197429
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    References listed on IDEAS

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    1. Homi Kharas, 1984. "The Long-Run Creditworthiness of Developing Countries: Theory and Practice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 415-439.
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