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A Retrospective on the Debt Crisis

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  • Michael P. Dooley

Abstract

In this paper I argue that the international debt crisis of 1982 can best be understood as a prolonged negotiation between commercial banks and their own governments over who would bear the economic losses generated by loans made to developing countries. This interpretation of the debt crisis is contrasted with the more familiar approach that emphasizes conflict between debtor countries and their creditors. The main conclusion is that the failure of governments of industrial countries to resolve this conflict with their banks transformed an unremarkable financial crisis into a decade-long economic crisis for debtor countries. The analysis also suggests that recent capital inflows to developing countries are less likely to generate the same economic costs for debtor countries even if changes in the economic environment generate similar losses for investors.

Suggested Citation

  • Michael P. Dooley, 1994. "A Retrospective on the Debt Crisis," NBER Working Papers 4963, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4963 Note: IFM
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    References listed on IDEAS

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    1. Robert Solomon, 1977. "A Perspective on the Debt of Deveoloping Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(2), pages 479-510.
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    3. Michael P. Dooley & Eduardo Fernandez-Arias & Kenneth M. Kletzer, 1994. "Recent Private Capital Inflows to Developing Countries: Is the Debt Crisis History?," NBER Working Papers 4792, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Dooley, Michael P., 2000. "International financial architecture and strategic default: can financial crises be less painful?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 53(1), pages 361-377, December.
    2. Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2003. "Modern economic growth and recent stagnation," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 45-62.
    3. Klimenko, Mikhail M., 2002. "Trade interdependence, the international financial institutions, and the recent evolution of sovereign-debt renegotiations," Journal of International Economics, Elsevier, vol. 58(1), pages 177-209, October.
    4. Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011. "Sovereign borrowing by developing countries: What determines market access?," Journal of International Economics, Elsevier, vol. 83(2), pages 243-254, March.
    5. Jérôme Sgard, 2004. "IMF in Theory: Sovereign Debts, Judicialisation and Multilateralism," Working Papers hal-01065546, HAL.
    6. repec:spo:wpecon:info:hdl:2441/6881 is not listed on IDEAS
    7. Baer, Werner & Hargis, Kent, 1997. "Forms of external capital and economic development in Latin America: 1820-1997," World Development, Elsevier, vol. 25(11), pages 1805-1820, November.
    8. Jérôme Sgard, 2004. "IMF in Theory: Sovereign Debts, Judicialisation and Multilateralism," Sciences Po publications 2004-21, Sciences Po.
    9. Milesi-Ferretti, Gian Maria & Razin, Assaf, 1996. "Current Account Sustainability: Selected East Asian and Latin American Experiences," CEPR Discussion Papers 1509, C.E.P.R. Discussion Papers.
    10. Illing, Mark & Liu, Ying, 2006. "Measuring financial stress in a developed country: An application to Canada," Journal of Financial Stability, Elsevier, vol. 2(3), pages 243-265, October.
    11. Hussein, Khaled A. & de Mello, Luiz Jr., 2001. "Is foreign debt portfolio management efficient in emerging economies?," Journal of Development Economics, Elsevier, vol. 66(1), pages 317-335, October.
    12. Fabrice Tourre, 2017. "A Macro-Finance Approach to Sovereign Debt Spreads and Returns," 2017 Meeting Papers 13, Society for Economic Dynamics.
    13. Dani Rodrik, 1995. "Why is there Multilateral Lending?," NBER Working Papers 5160, National Bureau of Economic Research, Inc.
    14. Khaled Hussein, 2001. "Is Foreign Debt Portfolio Management Efficient in Emerging Economies?," IMF Working Papers 01/121, International Monetary Fund.
    15. Miron, Jeffrey A., 2009. "Bailout or Bankruptcy? A Libertarian Perspective on the Financial Crisis," Scholarly Articles 4319665, Harvard University Department of Economics.
    16. Laura Alfaro & Fabio Kanczuk, 2006. "Deuda soberana: indexación y vencimiento," Research Department Publications 4460, Inter-American Development Bank, Research Department.
    17. Sarno, Lucio & Taylor, Mark P., 1999. "Hot money, accounting labels and the permanence of capital flows to developing countries: an empirical investigation," Journal of Development Economics, Elsevier, vol. 59(2), pages 337-364, August.
    18. Mark Illing & Ying Liu, 2003. "An Index of Financial Stress for Canada," Staff Working Papers 03-14, Bank of Canada.
    19. Fausto Hernández Trillo & Alejandro Villagómez Amezcua, 2000. "La estructura de la deuda pública en México: Lecciones y perspectivas," IDB Publications (Working Papers) 2108, Inter-American Development Bank.
    20. Canuto, Otaviano & Pinto, Brian & Prasad, Mona, 2012. "Orderly sovereign debt restructuring : missing in action !," Policy Research Working Paper Series 6054, The World Bank.

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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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