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American Economic Policy And The International Debt Crisis


  • SINN, H.W.


This paper advances the hypothesis that the world debt crisis was mainly induced by the dramatic rise of US interest rates in the first half of the eighties. It sees this rise in interest rates primarily as a result of a tight US monetary policy and excessively large investment incentives provided by the 1981 Us tax reform. A welfare analysis shows that the policies could have increased the US advantage from lending its capital abroad, had they been more moderately designed. The actual policies, however, were by far too strong to produce this result.
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Suggested Citation

  • Sinn, H.W., 1990. "American Economic Policy And The International Debt Crisis," Papers 61, Princeton, Woodrow Wilson School - Discussion Paper.
  • Handle: RePEc:fth:priwdp:61

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    References listed on IDEAS

    1. Daniel Cohen & Jeffrey Sachs, 1991. "Growth and External Debt Under Risk of Debt Repudiation," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 437-472 National Bureau of Economic Research, Inc.
    2. Hardy, Chandra S., 1979. "Commercial bank lending to developing countries: Supply constraints," World Development, Elsevier, vol. 7(2), pages 189-197, February.
    3. Jonathan Eaton & Mark Gersovitz, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Oxford University Press, vol. 48(2), pages 289-309.
    4. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
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    debt ; fiscal policy ; monetary policy;


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