Our LDC Debts

Rudiger Dornbusch

NBER Working Paper No. 2138 (Also Reprint No. r1022)
Issued in 1987
NBER Program(s):International Trade and Investment, International Finance and Macroeconomics

The U.S. has significant interests involved in the world debt problem. It affects the profitability and even the stability of our banking system, but the debt problem also matters because debt service requires trade surpluses for debt- ors. Debtor countries have made their goods extra competitive, are selling in our market and are competing with our exports. The debt problem is therefore a part, though perhaps a small part, of the U.S. trade crisis. Finally we have a major foreign policy stake in the debt crisis in that debt collection brings about social and political instability. The paper sets out debt facts, followed with a brief look at the origins of the debt problem. The "transfer problem" is the general framework in which we discuss the problem of debt service for the debtor countries. We then discuss bank exposure and the quality of debts. The paper then addresses the trade implications of debt service and concludes with an overview of alternative proposals for solving the debt problem.

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Document Object Identifier (DOI): 10.3386/w2138


  • Feldstein, Martin (ed.) The United States in the World Economy. Chicago: University of Chicago Press, 1988.
  • "Our LDC Debts." from The United States in the World Economy, edited by Martin Feldstein, pp. 161-196, Chicago: The University of Chicago Press, 1988.
  • Our LDC Debts, Rudiger Dornbusch, Thomas S. Johnson, Anne O. Krueger. in The United States in the World Economy, Feldstein. 1988

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