Foreign Debt And Capital Accumulation Center
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Optimal Reserve Management and Sovereign Debt
Most models currently used to determine optimal foreign reserve holdings take the level of international debt as given. However, given the sovereign s willingness-to-pay incentive problems, reserve accumulation may reduce sustainable debt levels. In addition, assuming constant debt levels does not allow
Center for International Economic Growth
capital. Until confidence is restored and citizens are willing to invest in their own countries, the debt crisis will continue. Another technique used to manage debt is exchange of debt for export goods. In effect, debtor governments repay loans or pay interest by turning over export goods - generally nontraditional ones - to creditor banks.
Reserve Accumulation and Financial Crises: From Individual
Since the accumulation of reserves constitutes a capital in ow to the reserve currency country, it increases its external indebtedness. This may create the macroeconomic backdrop for a sovereign debt crisis, a currency crisis or a banking crisis. A crisis in the center country, however, destabilize the international nancial system.
Sovereign debt, government myopia, and the financial sector
short while.2 With sovereign debt around the world at extremely high levels, understanding why sovereigns repay foreign creditors, and what their debt capacity might be, is an important concern for policy makers and investors. This paper attempts to address these issues. A number of recent papers offer a persuasive explanation of why some countries
International Reserves and Rollover Risk
nonresidents (i.e., government debt) and purchases of foreign assets by residents (i.e. international reserves) are both procyclical and collapse during crises (Fact 2). 3 The key to accounting for Fact 2 is the countercyclical nature of default risk.
Moki an analysis of the relationship between public debt and
expected repayment ability on external debt falls below the contractual value of debt. Cohen s (1993) theoretical model posits a non-linear impact of foreign borrowing on investment (as suggested by Clements et al. (2003), this relationship can be arguably extended to growth). Thus, up to a certain threshold, foreign debt accumulation can 3
Capital Accumulation in Thailand
capital accumulation of both local and foreign investors. The government justified this militarism on grounds of national security. As a result of this pattern of accumulation, imbalances in the economic and polit ical power among social groups widened, the current account deficit grew out of con trol, and the debt burden deepened.
FDI and economic growth: the role of local financial markets
enhancing technological innovation, capital accumulation, and economic growth almost a century ago. In a nutshell, the argument goes that well-functioning financial markets, by lowering costs of conducting transactions, ensure capital is allocated to the projects that yield the highest returns, and therefore, enhances growth rates. Well-known early
On Capital Flows and the Balance-of-Payments-Constrained
economies. However, as mentioned before, their treatment of foreign capital ignored the potential complications introduced by external debt accumulation and, therefore, ignored an element that, in practice, has frequently derailed apparently sound and strong economic growth pro-cesses. In fact, this shortcoming may question whether the balance-
Fiscal Imbalances and Current Account Adjustments in the
Nov 05, 2016 However, flows of capital resulted from excessive external imbalances followed by the periods of large current account deficits obviously strengthened intention of policy makers as well as academics to investigate the contribution of internal and external sources of current account imbalances to associated foreign debt accumulation.
Sovereign Debt, Volatility, and Insurance
macroeconomic volatility and financial crises. Capital account reversals often lead sovereign debt repayment crises that are only resolved after prolonged and difficult debt restructuring. Foreign indebtedness exacerbates domestic financial distress in crisis, increasing both the incidence and severity of emerging market crises.
Foreign Exchange Reserve Accumulation Recent and Adequacy
Annex: Foreign Exchange Reserve Accumulation Recent Developments and Adequacy Measures1 Global foreign currency reserves rose sharply in the years prior to the global economic crisis, and continued to rise in the early months after the onset of the financial crisis, peaking at $7.15 trillion in July 2008.
Capital Controls and Monetary Policy in Developing Countries
Capital Controls and Monetary Policy in Developing Countries José Antonio Cordero and Juan Antonio Montecino April 2010 Center for Economic and Policy Research 1611 Connecticut Avenue, NW, Suite 400 Washington, D.C. 20009 202-293-5380 www.cepr.net
Report to Congress on International Economic and Exchange
China s continued rapid pace of foreign reserve accumulation and the huge flow of capital from the Chinese public to advanced countries that it implies, the essentially unchanged level of China s real effective exchange rate especially given rapid productivity growth in the traded
Public Disclosure Authorized Economic Growth, Foreign Loans
even if perfect substitutability exists between foreign and local capital, the pattern of debt growth is not affected, for a given total ICOR, when the economy is at the savings gap stage. 8/ Equation (4) implies a linear relation between national savings and Gross-National Product. The same relation is implied by Chenery and Strout (equation 5).
Yale University EliScholar A Digital Platform for Scholarly
The households own the physical and human capital and also have the net stock of debt, d, per unit of effective labor. They receive income from wages and rentals spend this income on accumulation of physical capital, accumulation of human capital, and consumption. Hence, the budget constraint is where r
The impact of capital market on economic growth: the Nigerian
debt financial capital which enables companies to avoid over-reliance on debt financing, thus improving corporate debt-to-equity ratio and also in the mobilization of resources for national growth. According to Ndako (2010), the capital market is viewed as a complex institution imbued with inherent mechanism
Reserve Accumulation, Growth and Financial Crises
of private agents to accumulate debt in response to an increase in the stock of reserves by the government. Hence, while the economy as a whole runs a current account surplus and gathers foreign reserves, the private sector accumulates foreign liabilities, consistent with the empirical ndings of Alfaro et al. (2011).
NBER WORKING PAPER SERIES INTERNATIONAL BORROWING TO FINANCE
capital and a nontradable consumption good and borrows or lends capital to achieve higher levels of welfare. A shift in time preference favoring future over current consumption has an ambiguous impact effect on foreign debt. Whether the country lends or borrows immediately depends upon whether the
STANFORD CENTER FOR INTERNATIONAL DEVELOPMENT
debt; capital controls Authors E-Mail Addresses: [email protected]; [email protected] 1 We are grateful to Jahangir Aziz, Ray Brooks, Michael Dooley, Sebastian Edwards, Mark Wright, and participants at the NBER Capital Flows Conference, the Stanford China Conference, and a seminar at the China
Debt: use it wisely
of the debt-investment-growth linkage, focusing on the medium-run impact of foreign debt inflows on investment, growth, and fiscal outcomes. We demonstrate substantial variability across countries in the extent to which foreign debt inflows fuel capital accumulation and growth convergence, depending on regional
s External Imbalances in a Two-Country Overlapping
overlapping generations model with production, capital accumulation and public debt the effects of financial integration on the net foreign asset positions of initially low-interest versus high-interest rate EMU countries. We find that a higher savings rate and a lower capital
Missing Capital - City University of New York
foreign debt by strategic opportunistic considerations when capital and productivity are relatively high. As shown by Kehoe and Perri (2002) and others, governments will be particularly inclined to repudiate foreign debt precisely under those conditions. Aware of the incentive to repudiate foreign debt, foreign investors will not fully
An Empirical Analysis of Pension Funds Assets Influencing
The 'Theory of Capital Accumulation 'is the theoretical underpinning of the study; it highlights the importance of harnessing pension funds for long term investment in infrastructure. 2.2.1Theory of Capital Accumulation by Karl Marx In Karl Marx's economic theory, Capital Accumulation is the operation whereby profits are reinvested into the
Working Paper No. 256 Should India use Foreign Exchange
foreign exchange market, and (iii) prudent external debt management. Foreign investment policy also underwent a gradual change to encourage foreign direct investment to India. India adopted current account convertibility of the Rupee on August 20, 1994. However, India has been following a cautious approach on Capital Account Convertibility (CAC),
External Debt, Capital Flight and Political Risk
External Debt, Capital Flight and Political Risk The Harvard community has made this article openly available. Please share how this access benefits you. Your story matters Citation Alesina, Alberto, and Guido Tabellini. 1989. External debt, capital flight and political risk. Journal of International Economics 27(3-4): 199-220.
Determinants of External Debt Accumulation in Turkey
With the start of negotiations, direct foreign capital inflows to Turkey have emerged and have taken the place of foreign debt. Starting from 2009, the seriousness of the candidacy period in the first years has disappeared, and with this development, there was e reversion from foreign direct investment to accumulation of external debt.
Center for International Development at Harvard University
free rate plus the term premium if there is a duration mismatch between reserves and debt. If the purchase of reserves is aimed at countering exchange rate variations, reserves are funded essentially by issuing issuing local currency-denominated debt, 5. which pays the local-to-foreign
Interplay of Foreign Aid, External Debt and Economic Growth
Published by Canadian Center of Science and Education 177 Interplay of Foreign Aid, External Debt and Economic Growth: The Nigeria Experience Peter N. MBA 1, Meriel Alali Bell-Gam & Peter S. UBI1 1 Department of Economics, University of Calabar, Calabar, Nigeria
Kyoto University, Graduate School of Economics Research
equations of rate of capital accumulation, debt-capital ratio, and capital-effective labor supply ratio. Section 3 obtains the steady-state equilibrium, investigates which financial regime (hedge finance, speculative finance, or Ponzi finance) firms belong to, and in addition examines the stability of the steady-state
Three Cycles of Debt Accumulation, 1960-86
accumulation of external debts beginning in the early 1960s. The chapter has made four main points. First, most of the debt accumulation took place during 1966-69, 1974-75, and 1979-82. Second, growth of the nominal debt stock overstates the burden of the debt because of the very rapid growth rates of GNP and exports.
However, Bordo and Christopher (2006) studied the relationship between foreign currency debt and the financial crises in the nineteenth and twentieth century; they found that exposure to foreign currency debt does not always generate a higher likelihood of financial crisis. They found that exposure to foreign currency debt does not lead to an
Competitive Equilibria With Limited Enforcement
private agents acting competitively and taking as given government default decisions on foreign debt. In an economy with capital these allocations can be decentralized if the government can tax capital income as well as default on foreign debt. The tax on capital income is needed to make private agents internalize a subtle externality.
Financial Liberalization and Adjustment in Chile and New Zealand
net exports, and foreign reserves for both countries. The Chilean period covers the 1975-1982 bust-boom-bust years of financial liberalization and high foreign debt accumulation, while the New Zealand analysis spans 1975 to 1991, with financial liberalization, real exchange rate appreciation, and output stagnation beginning in 1985.
Yale University EliScholar A Digital Platform for Scholarly
It has been argued that, in determining the optimal rate foreign debt accumulation, one should consider the variability of export earnings, in addition to such parameters as the domestic saving rate, the marginal propensity to import, and the projected mean export growth rate.
Financial system engagement and - The Carter Center
intervention in foreign exchange markets and the associated accumulation of reserves, in the effort to keep the currency undervalued and to build a large trade surplus. Second, the U.S. was frustrated at the slow pace of opening up financial services in China to direct investment.
Sovereign debt, government myopia, and the
short while.3 With sovereign debt in industrial countries at extremely high levels, understanding why sovereigns repay foreign creditors, and what their debt capacity might be, is an important concern for policy makers and investors around the world. This paper attempts to address these issues.
Varieties of Capital Flows - Harvard University
were intimately related with capital inflows in the form of growing foreign liability positions. But, now that financial dollarization has receded in the emerging market word (either through debt deleveraging or international reserve accumulation), the focus shifted to the macroeconomic effects of cross market flows, including extended periods
Debt and Economic Growth in Developing Countries: Jordan as a
contribution to the increase in investment, and indirect through an increase in the domestic capital accumulation which will enable the country to reduce the size of that gap by increasing the level income, which will in turn increase the rate of domestic savings (Chenery & Carter, 1973). As for the gap of foreign currency, the loans and
Sovereigns, Upstream Capital Flows and Global Imbalances
net debt ﬂows (government borrowing minus accumulation of foreign reserves) are negatively correlated with its growth only if the government debt is ﬁnanced by another sovereign. Upstream capital ﬂows seem puzzling from the perspective of neoclassical theory since this theory predicts that growing countries should receive capital ﬂows