Working Paper: CEPR ID: DP778
Authors: Daniel Cohen
Abstract: This paper surveys the literature on external debt which has developed over the past decade. Initially this literature emphasized the intertemporal nature of the balance of payments, and reflected the view that balance of payments movements were an equilibrium phenomenon reflecting either transitory disturbances or permanent transfers of capital towards the poor countries. Subsequently the literature emphasized the risk of debt repudiation and focused on a theory of optimal credit ceilings imposed on a sovereign debtor. The third stage analysed the effect of a `debt overhang' on domestic investment, and the final stage analysed how sovereign debt could be best reduced.
Keywords: growth; external debt
JEL Codes: F34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| external debt (F34) | domestic investment (E22) |
| debt overhang (H63) | domestic investment (E22) |
| external debt (F34) | growth constraints (O41) |
| debt repudiation risk (F34) | credit ceilings (E51) |
| credit ceilings (E51) | growth constraints (O41) |