Sustainable External Debt Levels: Estimates for Selected Asian Countries
Roberto Mariano and
Delano Villanueva
No 07-2005, Working Papers from Singapore Management University, School of Economics
Abstract:
High ratios of external debt to GDP in selected Asian countries have contributed to the initiation, propagation, and severity of the financial and economic crises in recent years, reflecting runaway fiscal deficits and excessive foreign borrowing by the private sector. Applying the formal framework proposed by Villanueva (2003) to a selected group of Asian countries, the research estimates the external debt thresholds beyond which further debt accumulation will have negative effects on growth and will become unsustainable. The framework is an extension of the standard neoclassical growth model that incorporates global capital markets. ‘Sustainability’ is measured in terms of the steady-state ratio of the stock of external debt to GDP, as functions of real world interest rates, risk spreads and their responsiveness to external debt burdens and market perceptions of country risk, marginal propensities to save out of national disposable income and foreign borrowing, rates of technical change, and parameters of the production function. The major policy implications are that in the long run, fiscal consolidation and the promotion of private saving are critical, and that reliance on foreign saving in a globalized financial world has limits, particularly when the risk spreads are positively correlated with rising external debt levels.
Pages: 26 pages
Date: 2005-03
New Economics Papers: this item is included in nep-fmk and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Published in SMU Economics and Statistics Working Paper Series
Downloads: (external link)
https://mercury.smu.edu.sg/rsrchpubupload/4934/RSM_Dan.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Server closed connection without sending any data back
Related works:
Working Paper: Sustainable External Debt Levels: Estimates for Selected Asian Countries (2005) 
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:siu:wpaper:07-2005
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Papers from Singapore Management University, School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by QL THor ().