Interest Rates, Growth and External Debt: The Macroeconomic Impact of Mexico's Brady Deal

Stijn Claessens (), Daniel Oks () and Sweder van Wijnbergen

No 904, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Interest rates fell sharply after Mexico's Brady deal, and private investment and growth recovered. We show, econometrically, that debt relief influenced the macroeconomy mostly though its favourable impact on uncertainty. While the impact of the variability of the future net transfer is significant, the impact of the net transfer itself is not. Specifically the favourable impact on uncertainty about future exchange rate crises is the dominant explanation of the macroeconomic response to debt relief. These results confirm the beneficial macroeconomic effects of debt relief, but reject the debt overhang hypothesis as a dominant factor.

Keywords: Debt Relief; Debt Uncertainty; Investment and Uncertainty; Uncertainty and Economic Growth (search for similar items in EconPapers)
JEL-codes: F34 (search for similar items in EconPapers)
Date: 1994-02
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=904 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Interest rates, growth, and external debt: the macroeconomic impact of Mexico's Brady deal (1993)
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:cpr:ceprdp:904

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=904

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().