The Debt Crisis: Structural Explanations of Country Performance

58 Pages Posted: 11 Apr 2007 Last revised: 18 Aug 2010

See all articles by Andrew Berg

Andrew Berg

International Monetary Fund (IMF) - Developing Country Studies Division

Jeffrey Sachs

affiliation not provided to SSRN

Date Written: June 1988

Abstract

This paper develops a cross-country statistical model of debt rescheduling, and the secondary market valuation of LDC debt, which links these variables to key structural characteristics of developing countries, such as the trade regime, the degree of income inequality, and the share of agriculture in GNP Our most striking finding is that higher income inequality is a significant predictor of a-higher probability of debt rescheduling in a cross-section of middle-income countries. We attribute this correlation to various difficulties of political management in economies with extreme inequality. We also find that outward-orientation of the trade regime is a significant predictor of a reduced probability of debt rescheduling.

Suggested Citation

Berg, Andrew and Sachs, Jeffrey, The Debt Crisis: Structural Explanations of Country Performance (June 1988). NBER Working Paper No. w2607. Available at SSRN: https://ssrn.com/abstract=979050

Andrew Berg (Contact Author)

International Monetary Fund (IMF) - Developing Country Studies Division ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8843 (Phone)
202-589-8843 (Fax)

Jeffrey Sachs

affiliation not provided to SSRN

No Address Available

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