External Debt, Capital Flight and Political Risk
Alberto Alesina and
Guido Tabellini
No 2610, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
This paper provides an explanation of the simultaneous occurrence of large accumulation of external debt, private capital outflow and relatively low domestic capital formation in developing countries. We consider a general equilibrium model in which two types of government with conflicting distributional goals randomly alternate in office. Uncertainty over the fiscal policies of future governments generates private capital flight and small domestic investment. This political uncertainty also provides the incentives for the current government to over accumulate external debt. The model also predicts that left wing governments are more inclined to impose restrictions on capital outflows than right wing governments. Finally, we examine how political uncertainty affects the risk premium charged by lenders and how debt repudiation may occur after a change of political regime.
Date: 1988-06
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)
Published as Journal of International Economics, Vol. 27, No. 4, pp. 199-220, November 1989.
Downloads: (external link)
http://www.nber.org/papers/w2610.pdf (application/pdf)
Related works:
Journal Article: External debt, capital flight and political risk (1989) 
Working Paper: 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) 
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:nbr:nberwo:2610
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2610
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().