 Emerging markets’ resource booms and busts, borrowing risk and regime changeUnurjargal Nyambuu and Willi Semmler Structural Change and Economic Dynamics, 2017, vol. 41, issue C, 29-42 Abstract: Resource booms create real sector and credit expansion in resource-rich countries; however it can also give rise to over-borrowing. If a resource bust hits, the affected economies contract through declining export revenues, and possibly face increased default risk. Thus, both booms and busts can create macroeconomic instability. Using a dynamic growth model, we model regime changes which reveal nonlinear effects of debt on the economy, depending on the level of leveraging. We find a change from stable to unstable dynamics if the external debt to capital ratio rises above a certain threshold. Risk premia are introduced highlighting the state-dependent borrowing costs for the dynamic paths. We study excess debt and over-leveraging as deviations from sustainable ratios. We find country-specific risk premia that are likely associated with booms and busts for the given debt assessment. Our empirical estimates suggest that certain oil-exporting countries are at a heightened risk for debt crises. Keywords: Regime change; Resource price; Economic growth; Over-borrowing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:41:y:2017:i:c:p:29-42 DOI: 10.1016/j.strueco.2017.02.001 Access Statistics for this article Structural Change and Economic Dynamics is currently edited by F. Duchin, H. Hagemann, M. Landesmann, R. Scazzieri, A. Steenge and B. Verspagen More articles in Structural Change and Economic Dynamics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.