The debt crisis: lessons of the 1980's for the 1990's

Graciela Kaminsky (graciela@gwu.edu) and Alfredo Pereira

No 481, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: One of the salient characteristics of the 1980s is the growth collapse of the Latin American debtor countries. The debt-overhang literature claims that the debt crisis is the main reason for the growth collapse. However, previous empirical work has failed to support this hypothesis. We reexamine this hypothesis further using simulation and econometric methods. We find that once we account for the effects of social inequality on government policy and consumption, the burden of servicing the debt becomes an important factor in explaining the collapse in investment and output growth in Latin America. We draw some conclusions for the 1990s.

Keywords: Capital; Debt (search for similar items in EconPapers)
Date: 1994
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Related works:
Journal Article: The debt crisis: lessons of the 1980s for the 1990s (1996)
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