Reinhart, Carmen and Rogoff, Kenneth and Savastano, Miguel (2003): Debt intolerance. Published in: Brookings Papers on Economic Activity , Vol. 1, (March 2003): pp. 1-74.
Download (351Kb) | Preview
This paper introduces the concept of “debt intolerance,” which manifests itself in the extreme duress many emerging markets experience at debt levels that would seem manageable by advanced country standards. We argue that “safe” external debt-to-GNP thresholds for debt intolerant countries are low, perhaps as low as 15 percent in some cases. These thresholds depend on a country’s default and inflation history. Debt intolerance is linked to the phenomenon of serial default that has plagued many countries over the past two centuries. Understanding and measuring debt intolerance is fundamental to assess the problems of debt sustainability, debt restructuring, capital market integration, and the scope for international lending to ameliorate crises. Our goal is to make a first pass at quantifying debt intolerance, including delineating debtors’ clubs and regions of vulnerability, on the basis on a history of credit events going back to the 1820s for over 100 countries.
|Item Type:||MPRA Paper|
|Original Title:||Debt intolerance|
|Keywords:||debt credibility credit risk default domestic debt dollarization sustainable|
|Subjects:||F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems
F - International Economics > F3 - International Finance > F32 - Current Account Adjustment; Short-Term Capital Movements
N - Economic History > N2 - Financial Markets and Institutions > N20 - General, International, or Comparative
|Depositing User:||Carmen Reinhart|
|Date Deposited:||11. Mar 2009 02:08|
|Last Modified:||12. Feb 2013 11:19|
Beers, David T., and Ashok Bhatia. 1999. “Sovereign Defaults: History.” Standard and Poor’s Credit Week, December 22.
Beim, David O., and Charles W. Calomiris. 2001. Emerging Financial Markets. New York: McGraw-Hill/Irwin.
Bosher, J.F. 1970. French Finances 177-1795 Cambridge: Cambridge University Press.
Bouchard, L. 1891. System financier de l'ancien regime, Paris: Guillaumin.
Bulow, Jeremy, and Kenneth Rogoff, 1989. "Sovereign Debt: Is to Forgive to Forget?" American Economic Review 79 (March) , 43-50.
Bulow, Jeremy, and Kenneth Rogoff. 1990. “Cleaning Up Third-World Debt Without Getting Taken To the Cleaners.” Journal of Economic Perspectives, vol. 4 (Winter): 31-42.
Cline, William. 1995. International Debt Reexamined. Washington: Institute for International Economics.
Díaz-Alejandro, Carlos. 1983. “Stories of the 1930s for the 1980s” in Aspe, et al. (eds.) Financial Policies and the World Capital Market: The Problem of Latin American Countries, Chicago: The University of Chicago Press for the NBER.
Díaz-Alejandro, Carlos. 1984, “Latin American Debt: I Don’t Think We Are in Kansas Anymore,” Brookings Papers on Economic Activity, No.2, pp. 335403.
Easterly, William R. 1989. “Fiscal Adjustment and Deficit Financing During the Debt Crisis.” In Husain and Diwan, eds., Dealing with the Debt Crisis. Washington DC: The World Bank: 91-113.
Easterly, William and Klaus Schmidt-Hebbel, 1994. "Fiscal Adjustment and Macroeconomic Performance." In W. Easterly et al. (eds.) Public Sector Deficits and Macroeconomic Performance. Oxford University Press for the World Bank.
Easterly, William R. 2001. The Elusive Quest for Growth. MIT Press: Cambridge, MA.
Eichengreen, Barry, Ricardo Hausmann, and Ugo Panizza. 2002. “Original Sin: The Pain, the Mystery, and the Road to Redemption.” Mimeograph. University of California, Berkeley.
Giovannini, Alberto and Martha de Melo. 1993. "Government Revenue from Financial Repression." American Economic Review, vol. 83 (no. 4): 953-963.
Goldstein, Morris. 2003. “Debt Sustainability, Brazil, and the IMF.” Working Paper WP03-1. Institute for International Economics.
International Monetary Fund. 1995. Private Market Financing for Developing Countries. Washington, DC: International Monetary Fund.
International Monetary Fund. 2002. “Assessing Sustainability,” available at: http://www.imf.org/external/np/pdr/sus/2002/eng/052802.htm
Jahjah, Samir, and Peter Montiel. 2003. Exchange Rate Policy and Debt Crises in Emerging Economies. IMF Working Paper WP/03/60. March.
Kaminsky, Graciela L., Carmen M. Reinhart, and Carlos A. Végh. 2003. “When It Rains, It Pours: Procyclical Capital Flows and Policies.” Mimeograph.
McKinnon, Ronald.1991. The Order of Economic Liberalization. Baltimore: Johns Hopkins University Press.
Morris, Stephen, and Hyun Song Shin. 2001. “Coordination Risk and the Price of Debt.” Forthcoming, European Economic Review.
Obstfeld, Maurice. 1994. “The Logic of Currency Crises.” Cahiers Economiques et Monetaires, 43.
Obstfeld, Maurice, and Kenneth S. Rogoff. 1996. Foundations of International Macroeconomics. Cambridge: MIT Press.
Prasad, Eswar, Kenneth Rogoff, Shang-Jin Wei and Ayhan Kose. 2003. “Effects of Financial Globalization on Developing Countries: Some Empirical Evidence,” IMF Occasional Paper. (Forthcoming).
Reinhart, Carmen M. 2002. “Credit Ratings, Default, and Financial Crises? Evidence from Emerging Markets.” World Bank Economic Review, vol. 16 (no. 2): 151-170.
Reinhart, Carmen M. and Vincent R. Reinhart. 2003. “The Twin Fallacies About Exchange Rate Policy in Emerging Markets.,” NBER Working Paper 9670. April.
Reinhart, Carmen M. and Kenneth S. Rogoff. 2002. “The Modern History of Exchange Rate Arrangements a Reinterpretation.” NBER Working Paper 8963. May.
Reinhart, Carmen M., Kenneth S. Rogoff, and Miguel A. Savastano. 2003. “Addicted to Dollars.” Mimeograph.
Reissen, Helmut. 1989. “Public Debt: North and South.” In Husain and Diwan, eds., Dealing with the Debt Crisis. Washington DC: The World Bank: 116-126.
Rogoff, Kenneth S. 1999. “International Institutions for Reducing Global Financial Stability.” Journal of Economic Perspectives, vol. 13 (no. 4): 21-42.
Sims, Christopher, 2001. “Fiscal Consequences for Mexico of Adopting the Dollar,” Journal of Money, Credit, and Banking Vol 33, No.2, Part 2: 597-616
Velasco, Andres. 1996. “Fixed Exchange Rates: Credibility, Flexibility and Multiplicity.” European Economic Review 40: 1023-1035.
Williamson, John. 1988. Voluntary Approaches to Debt Relief, Policy Analysis in International Economics 25, Washington: Institute for International Economics.
Williamson, John. 2002. “Is Brazil Next?” International Economics Policy Briefs PB 02-7, Washington: Institute for International Economics.