When Is External Debt Sustainable?
The article empirically examines the determinants of debt distress, defined as periods in which countries resort to any of three forms of exceptional finance: significant arrears on external debt, Paris Club rescheduling, and non-concessional Inter...
| Main Authors: | , |
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| Language: | English en_US |
| Published: |
Oxford University Press on behalf of the World Bank
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2006/09/17760901/external-debt-sustainable http://hdl.handle.net/10986/16425 |
| Summary: | The article empirically examines the
determinants of debt distress, defined as periods in which
countries resort to any of three forms of exceptional
finance: significant arrears on external debt, Paris Club
rescheduling, and non-concessional International Monetary
Fund lending. Probit regressions show that three factors
explain a substantial fraction of the cross-country and
time-series variation in the incidence of debt distress: the
debt burden, the quality of policies and institutions, and
shocks. The relative importance of these factors varies with
the level of development. These results are robust to a
variety of alternative specifications, and the core
specifications have substantial out-of-sample predictive
power. The quantitative implications of these results are
examined for the lending strategies of official creditors. |
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