Sustainable External Debt Levels : Estimates for Selected Asian Countries
High ratios of external debt to GDP in selected Asian countries have contributed to the initiation, propagation, and severity of the financial and economic crises in recent years, reflecting runaway fiscal deficits and excessive foreign borrowing by the private sector. Applying the formal framework proposed by Villanueva (2003) to a selected group of Asian countries, the research estimates the external debt thresholds beyond which further debt accumulation will have negative effects on growth and will become unsustainable. The framework is an extension of the standard neoclassical growth model that incorporates global capital markets. Sustainability is measured in terms of the steady-state ratio of the stock of external debt to GDP, as functions of real world interest rates, risk spreads and their responsiveness to external debt burdens and market perceptions of country risk, marginal propensities to save out of national disposable income and foreign borrowing, rates of technical change, and parameters of the production function. The major policy implications are that in the long run, fiscal consolidation and the promotion of private saving are critical, and that reliance on foreign saving in a globalized financial world has limits, particularly when the risk spreads are positively correlated with rising external debt levels.
|Date of creation:||Jan 2005|
|Contact details of provider:|| Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200|
Web page: http://www.eaber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-1037, October.
- Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
- Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
- Becker, Gary S & Murphy, Kevin M & Tamura, Robert, 1990. "Human Capital, Fertility, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 12-37, October.
- Gary S. Becker & Kevin M. Murphy & Robert Tamura, "undated". "Human Capital, Fertility, and Economic Growth," University of Chicago - Population Research Center 90-5a, Chicago - Population Research Center.
- Gary S. Becker & Kevin M. Murphy & Robert F. Tamura, 1990. "Human Capital, Fertility, and Economic Growth," NBER Working Papers 3414, National Bureau of Economic Research, Inc.
- Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
- Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
- Grossman, G.M. & Helpman, E., 1988. "Comparative Advantage And Long-Run Growth," Papers 39-88, Tel Aviv.
- Gene M. Grossman & Elhanan Helpman, 1989. "Comparative Advantage and Long-Run Growth," NBER Working Papers 2809, National Bureau of Economic Research, Inc.
- Rivera-Batiz, Luis A. & Romer, Paul M., 1991. "International trade with endogenous technological change," European Economic Review, Elsevier, vol. 35(4), pages 971-1001, May.
- Luis A. Rivera-Batiz & Paul M. Romer, 1991. "International Trade with Endogenous Technological Change," NBER Working Papers 3594, National Bureau of Economic Research, Inc.
- T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
- Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-380, December.
- Kenneth J. Arrow, 1962. "The Economic Implications of Learning by Doing," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 155-173.
- Delano Villanueva, 1994. "Openness, Human Development, and Fiscal Policies: Effects on Economic Growth and Speed of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 41(1), pages 1-29, March.
- Delano Villanueva, 1993. "Openness, Human Development, and Fiscal Policies; Effectson Economic Growth and Speed of Adjustment," IMF Working Papers 93/59, International Monetary Fund.
- Ken-ichi Inada, 1963. "On a Two-Sector Model of Economic Growth: Comments and a Generalization," Review of Economic Studies, Oxford University Press, vol. 30(2), pages 119-127.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. Full references (including those not matched with items on IDEAS)