Abstract

BHADURI, Amit. On the Viability of External Debt.Translated byMiguel Cansino,  Alfonso Anaya. Inv. Econ [online]. 2004, vol.63, n.250, pp.59-85. ISSN 0185-1667.

The article focuses the conditions that precipitate the financial crises like those happened some years ago in East Asia and Latin America. It proposes an analytical model about the viability of foreign debt. Among its main statements are that a debt crisis is triggered off by quantity rather than price rationing of debt. The former is the outcome of increasingly divergent expectations between the lenders and the borrower. The expectations about repayment relate not only to the capacity of the borrowing country to repay, but for doing in time. Conversely, expectations about repayment are open to speculative manipulation, specially if the country has limited exchange reserves. In this context, allowing inflows of "hot money" to raise reserves damages growth prospects and exposes the economy to speculative attacks on its currency. For reaching an informed opinion about whether a borrowing country has a viable external debt position, should be considered together the problems of solvency, illiquidity and coherence of expectations among lenders and borrowers, for which some plausible criteria are suggested.

        · abstract in Spanish     · text in Spanish     · Spanish ( pdf )