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External Debt Sustainability: Theory and Empirical Evidence

  • Marco Arnone

    (Catholic University of Milan)

  • Luca Bandiera

    (World Bank)

  • Andrea Presbitero

    (Politechnic University of Marche Italy)

This paper is a review of the different approaches on external debt sustainability. The Heavily Indebted Poor Country (HIPC) Initiative was launched to assure a permanent exit from debt dependence. However, the IMF-World Bank program is not without faults, in particular for what concerns debt sustainability analysis. The aim of this work is to present the IMF-World Bank approach to debt sustainability, together with the other approaches in the literature. We show that a new and broader framework is emerging to address the main shortcomings of the standard analysis, namely, the effects that large external debts and deficits have on growth and the macroeconomic environment.

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File URL: http://128.118.178.162/eps/if/papers/0512/0512007.pdf
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Paper provided by EconWPA in its series International Finance with number 0512007.

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Length: 48 pages
Date of creation: 25 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0512007
Note: Type of Document - pdf; pages: 48
Contact details of provider: Web page: http://128.118.178.162

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  1. Toan Quoc Nguyen & Benedict J. Clements & Rina Bhattacharya, 2003. "External Debt, Public Investment, and Growth in Low-Income Countries," IMF Working Papers 03/249, International Monetary Fund.
  2. Jonathan Eaton, 1991. "Sovereign Debt: A Primer," Boston University - Institute for Economic Development 21, Boston University, Institute for Economic Development.
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  4. Hélène Poirson & Luca Antonio Ricci & Catherine A. Pattillo, 2002. "External Debt and Growth," IMF Working Papers 02/69, International Monetary Fund.
  5. William R. Cline, 1995. "International Debt Reexamined," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 46, May.
  6. Carlos A. Rodríguez, 1990. "The External Effects of Public Sector Deficits," CEMA Working Papers: Serie Documentos de Trabajo. 70, Universidad del CEMA.
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  8. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
  9. Kraay, Aart & Nehru, Vikram, 2004. "When is external debt sustainable?," Policy Research Working Paper Series 3200, The World Bank.
  10. Claessens, Stijn & Detragiache, Enrica & Kanbur, Ravi & Wickham, Peter, 1996. "Analytical aspects of the debt problems of heavily indebted poor countries," Policy Research Working Paper Series 1618, The World Bank.
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  12. Jean Imbs & Romain Rancière, 2005. "The overhang hangover," Economics Working Papers 878, Department of Economics and Business, Universitat Pompeu Fabra.
  13. Annalisa Fedelino & Alina Kudina, 2003. "Fiscal Sustainability in African HIPC Countries; A Policy Dilemma?," IMF Working Papers 03/187, International Monetary Fund.
  14. Kamau Thugge & Anthony R. Boote, 1997. "Debt Relief for Low-Income Countries and the HIPC Initiative," IMF Working Papers 97/24, International Monetary Fund.
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  16. John T. Cuddington, 1997. "Analysing the Sustainability of Fiscal Deficits in Developing Countries," International Finance 9706001, EconWPA.
  17. Jakob Christensen, 2004. "Domestic Debt Markets in Sub-Saharan Africa," IMF Working Papers 04/46, International Monetary Fund.
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  19. Hjertholm, Peter, 2001. "Debt Relief and the Rule of Thumb: Analytical History of HIPC Debt Sustainability Targets," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  20. Asiedu, Elizabeth, 2003. "Debt relief and institutional reform: a focus on Heavily Indebted Poor Countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 614-626.
  21. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
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  25. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
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