External and Domestic Debt Constraints of LDCs: a Theory with a Numerical Application to Brazil and Mexico

Daniel Cohen

Chapter 8 in Global Macroeconomics: Policy Conflict and Cooperation, 1987, pp 279-306 from Palgrave Macmillan

Abstract: Abstract In a psrevious work (1985), I have argued that most debtor nations need allocate no more than 15 per cent of their exports to the service of their debt in order to be declared solvent. Brazil spent twice this amount on debt service between 1983 and 1986 and — as a result — her debt-to-export ratio went down substantially (from four to three). An often-heard argument was that a debtor should hurry to bring down its debt-to-export ratio so as to allow ‘voluntary lending’ to resume. In other words, the debt-to-export ratio should go down, so as to go up later on! It is hard to think of any optimising model which would predict this result (except for short-term fluctuations).1

Keywords: Interest Rate; Real Exchange Rate; Real Interest Rate; Private Capital; Government Debt (search for similar items in EconPapers)
Date: 1987
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DOI: 10.1007/978-1-349-18916-8_8

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