When is external debt sustainable?

Aart Kraay () and Vikram Nehru

No 3200, Policy Research Working Paper Series from The World Bank

Abstract: This paper examines the determinants of"debt distress,"which they define as periods in which countries resort to exceptional finance in any of three forms: (1) significant arrears on external debt, (2) Paris Club rescheduling, and (3) nonconcessional International Monetary Fund lending. Using probit regressions, the authors find that three factors explain a substantial fraction of the cross-country and time-series variation in the incidence of debt distress: the debt burden, the quality of policies and institutions, and shocks. They show that these results are robust to a variety of alternative specifications, and that their core specifications have substantial out-of-sample predictive power. The authors also explore the quantitative implications of these results for the lending strategies of official creditors.

Keywords: Banks&Banking Reform; Economic Theory&Research; Strategic Debt Management; Environmental Economics&Policies; Payment Systems&Infrastructure; Economic Theory&Research; Strategic Debt Management; Banks&Banking Reform; Environmental Economics&Policies; Housing Finance (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
Date: 2004-02-01
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Related works:
Journal Article: When Is External Debt Sustainable? (2006)
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