The Political Economy of Sovereign Debt Overhang (IGC Policy Brief)

Abstract

Developing economies have heterogeneous experiences with growth and openness. Our research addresses why this may be so. The research documents a core empirical fact: The countries that grow relatively fast do so while reducing sovereign liabilities and accumulating foreign reserves. Standard economic intuition states that a capital-poor country can benefit from openness by importing financial capital. However, in practice, countries that accumulate foreign liabilities tend to stagnate, while fast-growing economies provide capital to the rest of the world. This project builds an economic framework to understand this phenomenon and provide policy guidance.

Citation

Aguiar, M.; Amador, M. The Political Economy of Sovereign Debt Overhang (IGC Policy Brief). International Growth Centre (IGC), London, UK (2009) 4 pp.

The Political Economy of Sovereign Debt Overhang (IGC Policy Brief)

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