External Debt Sustainability in Three Asian Economies

Esta Lestari
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Esta Lestari: Economic Research Centre, Indonesia Institute of Sciences (P2E-LIPI)

Economics and Finance in Indonesia, 2007, vol. 55, 47-64

Abstract: This paper examines whether three highly indebted countries in Asia, namely Indonesia, Korea and the Philippines had borrowed in an unsustainable manner. Krueger’s approach (1987) for calculating the relative contribution of global changes to a country’s debt sustainability is employed. In particularly, the global shocks examined are the oil shock in 1978 and the Asian crisis in 1997. The analysis shows that the two shocks led to a different impact for each country in terms of the difficulties to service its debts. The Asian crisis led to a higher impact compared to the oil shock for Indonesia in servicing its debt which subsequently classifies Indonesia as a country with unsustainable debt. In contrast, the Philippines felt higher impact in its debt due to the oil shock than the crisis. As for Korea, it has been able to manage the debt sustainability due to its superior export performance

Keywords: Debt sustainability; Oil Shock 1978/1978; Asian crisis 1997/1998 (search for similar items in EconPapers)
JEL-codes: H00 H63 (search for similar items in EconPapers)
Date: 2007
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