Growth, External Debt and Sovereign Risk in a Small Open Economy

40 Pages Posted: 15 Feb 2006

See all articles by Jagdeep S. Bhandari

Jagdeep S. Bhandari

Wake Forest University - School of Law; International Monetary Fund (IMF)

Nadeem Ul Haque

Pakistan Institute of Development Economics

Stephen J. Turnovsky

University of Washington - Institute for Economic Research; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: June 23, 1989

Abstract

This paper constructs and analyzes an optimizing model of a highly-indebted small open economy. An important innovation in the model is the incorporation of sovereign risk through the specification of an upward-sloping foreign debt supply function. The model is used to examine the interaction between external debt and growth in response to various policies and exogenous disturbances. It is shown that structural policies intended to reduce the fiscal deficit or increase productivity can lead to tradeoffs in their effect on capital accumulation and the stock of debt.

JEL Classification: 023, 121, 311, 431

Suggested Citation

Bhandari, Jagdeep S. and Ul Haque, Nadeem and Turnovsky, Stephen J., Growth, External Debt and Sovereign Risk in a Small Open Economy (June 23, 1989). Available at SSRN: https://ssrn.com/abstract=884842 or http://dx.doi.org/10.2139/ssrn.884842

Jagdeep S. Bhandari (Contact Author)

Wake Forest University - School of Law ( email )

P.O. Box 7206
Winston-Salem, NC 27109
United States

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Nadeem Ul Haque

Pakistan Institute of Development Economics ( email )

Quaid-i-Azam University Campus, P.O. Box. 1091
Islamabad, Capital 44000
Pakistan
+92-51-9217879 (Phone)
+92-51-9210886 (Fax)

HOME PAGE: http://www.saneinetwork.net/structure/st_comm/NadeemUlHaque.asp

Stephen J. Turnovsky

University of Washington - Institute for Economic Research ( email )

Seattle, WA 98195
United States
206-685-8028 (Phone)
206-543-5955 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
228
Abstract Views
1,156
rank
174,103
PlumX Metrics