Title

External Debt and Worsening Business Cycles in Less Developed Countries

Publication Type

Journal Article

Publication Date

2003

Abstract

Less developed countries (LDCs) have seen considerable business cycles in recent decades. At the same time they have significantly increased their external-debt-to-GDP ratios. It seems natural to suspect that increased indebtedness and the amplified cycles are linked. The paper presents a simple macroeconomic model to formalize this connection. External debt is the novelty of this model. The paper's main contribution is to calibrate the dynamic parameter using the World Development Indicator. It is found that the LDC dynamic behavior is generally non-oscillatory. Alarmingly though, the dynamic convergent system in the 1970s has been replaced by one of divergence.

Keywords

Developing countries, Debt, Business cycles

Discipline

Finance

Research Areas

Econometrics

Publication

Journal of Economic Studies

Volume

30

Issue

2

First Page

155

ISSN

0144-3585

Publisher

MCB University Press

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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