External Debt and Economic Reform: Does a Pain Reliever Delay the Necessary Treatment?

29 Pages Posted: 13 Mar 2007

See all articles by Athanasios Vamvakidis

Athanasios Vamvakidis

International Monetary Fund (IMF) - European Department

Date Written: March 2007

Abstract

Recent literature argues that conflict in shifting adjustment costs between different socioeconomic groups delays necessary reforms and finds that such reforms often follow economic crises. This paper expands these models by including external borrowing by the private sector and shows that this may lead to a further delay in economic reform. Empirical evidence based on a large panel of developing and emerging economies supports this argument and shows that the result is slower economic growth. External financing sometimes acts like a "pain reliever," postponing the much needed "treatment" of a "sick" economy by reform.

Keywords: External debt, Economic reforms, Economic growth

JEL Classification: E60, F41, O11

Suggested Citation

Vamvakidis, Athanasios, External Debt and Economic Reform: Does a Pain Reliever Delay the Necessary Treatment? (March 2007). IMF Working Paper No. 07/50, Available at SSRN: https://ssrn.com/abstract=969864 or http://dx.doi.org/10.2139/ssrn.969864

Athanasios Vamvakidis (Contact Author)

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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

Paper statistics

Downloads
83
Abstract Views
706
rank
381,689
PlumX Metrics