NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Retrospective on the Debt Crisis

Michael P. Dooley

NBER Working Paper No. 4963 (Also Reprint No. r1980)
Issued in December 1994
NBER Program(s):   IFM

In this paper I argue that the international debt crisis of 1982 can best be understood as a prolonged negotiation between commercial banks and their own governments over who would bear the economic losses generated by loans made to developing countries. This interpretation of the debt crisis is contrasted with the more familiar approach that emphasizes conflict between debtor countries and their creditors. The main conclusion is that the failure of governments of industrial countries to resolve this conflict with their banks transformed an unremarkable financial crisis into a decade-long economic crisis for debtor countries. The analysis also suggests that recent capital inflows to developing countries are less likely to generate the same economic costs for debtor countries even if changes in the economic environment generate similar losses for investors.

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Document Object Identifier (DOI): 10.3386/w4963

Published: Understanding Interdependence: The Macroeconomics of the Open Economy, Peter B. Kenen, ed., pp. 262-288 (Princeton: Princeton University Press: 1995).

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