External Debt, Capital Flight and Political Risk

Guido Tabellini and Alberto Alesina

Scholarly Articles from Harvard University Department of Economics

Abstract: This paper explains the simultaneous occurrence of large external debts, private capital outflows and low domestic capital formation. We consider a general equilibrium model in which two government types with conflicting distributional goals randomly alternate in office. Uncertainty over the fiscal policies of future governments generates capital flight and small domestic investment, and induces the government to overaccumulate external debt. The model also predicts that left-wing governments are more inclined to restrict capital outflows than right-wing governments. Finally, we examine how political uncertainty affects the risk premium and how debt repudiation may occur after a regime change.

Date: 1989
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (195)

Published in Journal of International Economics

Downloads: (external link)
http://dash.harvard.edu/bitstream/handle/1/4553019/alesina_externaldebt.pdf (application/pdf)

Related works:
Journal Article: External debt, capital flight and political risk (1989)
Working Paper: External Debt, Capital Flight and Political Risk (1988)
Working Paper: External Debt, Capital Flight and Political Risk (1988)
Working Paper: External Debt, Capital Flight and Political Risk (1988)
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:hrv:faseco:4553019

Access Statistics for this paper

More papers in Scholarly Articles from Harvard University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Office for Scholarly Communication ().