THE ANALYSIS OF THE U.S. EXTERNAL DEBT IN TERMS OF FACING THE CHALLENGES OF THE WORLD ECONOMIC DEVELOPMENT

Andrii Pin
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Andrii Pin: Ternopil National Economic University

EUREKA: Social and Humanities, 2017, issue 1, 11-19

Abstract:

The up-to-date approaches to external debt and its effects on economic processes entrench the standpoint of debt financing being the distinctive feature of the modern inclined-to-liberalization world. Subsequently, unhampered capital flow between economies is the offspring of macroeconomic equilibrium, since the allocation of capital based on barrier-free movement pays the way for factor prices levelling. Given these points, commodity prices develop a propensity for adjustment, financial system acquires sustainability and reliability. This research builds on existing knowledge in the domain of debt and is conducted in pursue of analyzing the U.S. external debt and effects it has on both the U.S. Economy and the global economy. Prior to looking into the external debt itself, the research study reveals the latest world financial and economic tendencies, the distinguishing features of which are low interest rates and smoldering economic growth. The IMF dubbed this economic agenda as “…a low growth, low-rate area” [1]. Along similar lines, the results of the research lend firm support to the view that the U.S. external debt poses little threat to the world economy in the short-run, since the U.S. economic growth outpaces debt servicing costs build-up. However, in case of the emergence of an economic decline, the United States may face challenges of debt servicing in the long-run perspective, hence fail to comply with the sacred principles of debt relationship such as timeliness and solvency.

Keywords: the U.S. external debt; the U.S. national debt; debt financing; debt effects; solvency and liquidity (search for similar items in EconPapers)
Date: 2017-01-31
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