The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.

For dozens of developing countries, the financial upheavals of the 1980s have set back economic development by a decade or more. Poverty in those countries have intensified as they struggle under the burden of an enormous external debt. In 1988, more than six years after the onset of the crisis, almost all the debtor countries were still unable to borrow in the international capital markets on normal terms. Moreover, the world financial system has been disrupted by the prospect of widespread defaults on those debts. Because of the urgency of the present crisis, and because similar crises have recurred intermittently for at least 175 years, it is important to understand the fundamental features of the international macroeconomy and global financial markets that have contributed to this repeated instability. Developing Country Debt and the World Economy contains nontechnical versions of papers prepared under the auspices of the project on developing country debt, sponsored by the National Bureau of Economic Research. The project focuses on the middle-income developing countries, particularly those in Latin America and East Asia, although many lessons of the study should apply as well to other, poorer debtor countries. The contributors analyze the crisis from two perspectives, that of the international financial system as a whole and that of individual debtor countries. Studies of eight countries—Argentina, Bolivia, Brazil, Indonesia, Mexico, the Philippines, South Korea, and Turkey—explore the question of why some countries succumbed to serious financial crises while other did not. Each study was prepared by a team of two authors—a U.S.-based research and an economist from the country under study. An additional eight papers approach the problem of developing country debt from a global or "systemic" perspective. The topics they cover include the history of international sovereign lending and previous debt crises, the political factors that contribute to poor economic policies in many debtor nations, the role of commercial banks and the International Monetary Fund during the current crisis, the links between debt in developing countries and economic policies in the industrialized nations, and possible new approaches to the global management of the crisis.

The papers presented here were first given at the International Conference of Economists at the University of Zagreb in Yugoslavia. The book contains a rare selection of divergent theoretical and practical views on the acute problem of international debt and its repercussions on world economic growth at large and the developing countries in particular.

Developing Country Debt presents a variety of views and perspectives on the topic of debt in developing countries, with emphasis on the revolutionary effects of the post-1973 OPEC oil prices on the world's economic system. The book shows how the problem of developing country debt has become inexorably intertwined with the successful functioning of the global economic system. This book is comprised of 14 chapters and opens with a historical overview of developing nations' debt before turning to LDC debt since the 1973 OPEC price increases and the developing countries' abilities to carry debt. The myths of debt are also analyzed from a banker's perspective. The next section presents case studies detailing the economic and political conditions of selected countries with substantial debt and varying degrees of economic difficulty, including the Philippines, Jamaica, Turkey, and Peru. The remaining chapters examine alternative proposals for debt relief and place the analysis of developing country debt in a broader, global context. LDC debt is considered from three perspectives: the development needs of LDCs; the safety and soundness of United States banks; and the U.S. national interest. The role of the International Monetary Fund as a lender of last resort is also considered. The final chapter assesses the implications of debt for trade and the prospects for world economic growth. This monograph will be of interest to economists, bankers, politicians, and policymakers.

This book is a collection of essays written by Ambassador, Professor Jørgen Ørstrøm Møller from the middle of 2009 to end of 2012, commenting on global economic and political events, which reflect Moeller's judgment and evaluation on these issues.Readers get an overview to the collection of essays and the worldview they represent in an introductory chapter weaving together strands of economics, politics, and societal issues. Møller goes a step further by sketching up a picture of how a future economic model and political system may look — forged by debt, scarcities, economic integration, and the rise of Asia.Part I deals with global systems and possible long trends shaping the future over the coming decades, as the current political system and economic model, having run their course, come to an end.Part II discusses how the era of scarcities will change economic behaviour in terms of economic models.Part III looks into the global debt problem, which confines the world to low growth over one or two decades as the world tries to get rid of the debt burden.Part IV forms an analysis of what has happened in the Euro-zone and how the global debt crisis has compelled the Europeans to take the next steps in integration and address the shortcomings and flaws in the original treaty from 1992.Part V turns to Asia and its future in the global economy. It concentrates on Asian integration and how the Asian countries will fare in the future under much changed circumstances compared to how things looked when the Asian adventure started some 30-40 years ago.At the end, readers will find a short post-scriptum with some of Moeller's afterthoughts on the important issues discussed throughout the book.

This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost four decades, takes into account a broad range of determinants of growth as well as various estimation issues including reverse causality and endogeneity. In addition, threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined. The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of growth: on average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year, with the impact being somewhat smaller in advanced economies. There is some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth. Analysis of the components of growth suggests that the adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.