Public Debt and Fiscal Policy in Developing Countries
19 Pages Posted: 15 Feb 2006
Date Written: September 30, 1986
This paper discusses the interrelationships between fiscal deficits and public debt. It analyzes the sources of growth of domestic and foreign public debt, and deals with the fiscal policy constraints imposed by a high level of indebtedness. It also discusses the macro-economic effects of public debt, concentrating on the external sector and monetary policy implications as well as the effects on key prices throughout the economy. The empirical section presents some stylized facts about the evolution of foreign debt in a selected group of developing countries and estimates its sources of growth as well as the factors affecting interest rates in debtor countries.
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