Abstract
A simple balance of payments accounting framework is used to analyze the role of interest rates and commodity prices in the debt crisis of Argentina, Brazil, Mexico and Venezuela. It is argued that high real interest rates in the 1980s were unexpected by showing that the actual path was significantly far away from an optimal forecast based on an ARIMA process estimated for the 1954–1979 as well as for the 1926–1979 period. According to the legal principle of unforeseen change of circumstances, this may provide sufficient grounds for partial debt forgiveness by a court of law.
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