International Borrowing to Finance Investment

Charles Engel and Kenneth Kletzer

No 1865, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The motives of a small country for borrowing to purchase capital equipment on international markets are studied. The country produces tradable capital and a nontradable consumption good and borrows or lends capital to achieve higher levels of welfare. A shift in time-preference favoring future over current consumption has an ambiguous impact effect on foreign debt. Whether the country lends or borrows immediately depends upon whether the consumption goods sector is capital or labor intensive. The dynamic behavior of the current account for an initially capital-poor country is also derived. Our results contrast with those of previous studies of optimal indebtedness in which consumables are borrowed directly.

Date: 1986-03
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w1865.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1865

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1865

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().