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Debt Intolerance


Carmen M. Reinhart


Peter G. Peterson Institute for International Economics; National Bureau of Economic Research (NBER)

Kenneth Rogoff


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Miguel A. Savastano


International Monetary Fund (IMF) - Research Department

August 2003

NBER Working Paper No. w9908

Abstract:     
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.

Number of Pages in PDF File: 77

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Date posted: August 19, 2003  

Suggested Citation

Reinhart, Carmen M. and Rogoff, Kenneth and Savastano, Miguel A., Debt Intolerance (August 2003). NBER Working Paper No. w9908. Available at SSRN: http://ssrn.com/abstract=435482

Contact Information

Carmen M. Reinhart (Contact Author)
Peter G. Peterson Institute for International Economics ( email )
1750 Massachusetts Avenue, NW
Washington, DC 20036
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Kenneth S. Rogoff
Harvard University - Department of Economics ( email )
Littauer Center
Room 232
Cambridge, MA 02138
United States
617-495-4022 (Phone)
617-495-7730 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Miguel A. Savastano
International Monetary Fund (IMF) - Research Department ( email )
700 19th Street NW
Washington, DC 20431
United States
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