Foreign Government Debt Research Articles

The Players and the Game of Sovereign Debt

Is there “justice” in treating developing country debt crises? As a first step toward analyzing ethical questions in sovereign debt, this paper characterizes the actors, their main interests, and how they operate during the build up of government foreign debt and after a default on payments. These actors are the borrowing governments, domestic and foreign commercial banks, purchasers of government bonds, other governments lending to the debtor, and multilateral institutions (International Monetary Fund and development banks). As there is no international sovereign analog to court-supervised bankruptcy, the workout from crisis is found ad hoc, without rules or an enforcement mechanism.

Changes in Finland's International Investment Position, 1985-1998. A Brief Statistical Analysis

This paper attempts to describe and compare developments in the components of Finland's net international investment position (NIIP). The data consist of sectoral flows and valuation items over the period 1985 - 1998, which is, for analytical purposes, broken down into two subperiods: before and after the Finnish markka was floated. The study focuses on the main sectors, ie banks, corporations and the central government. Valuation items (changes in exchange rates and equity prices) are also important in the decomposition of the NIIP, particularly as regards recent history of equity prices. The mean and variability of each item is estimated, and for some items also bivariate robust variance tests are carried out. The major feature in Finland's balance of payments has been nonresidents' increased interest in Finnish equities as an object of investment. This phenomenon, along with the boom in share prices, has in recent years raised the equity holdings of foreigners to the rank of most significant item in Finland's international investment position. Another important feature in the BOP is the rapid growth of the central government's foreign debt due to the deep recession of 1991 - 1994. In respect to Finland, it is important to note the different stories told by developments in NIIP vs net external debt components: NIIP figures indicate that ownership of corporations based in Finland has indeed become global and that the value of shares has been increasing, whereas net external debt figures indicate that the economy has succeeded in restoring external indebtedness to pre-recession levels. The results also confirm that the Finnish banks still contribute prominently to variations in Finnish BOP flows. As regards the late 1980s and early 1990s, this can be inferred from the highly bank-oriented structure of Finnish financial markets, but the same holds true during the 1990s as well in the period of recovery from economic crisis.

Introduction: The Players and the Game of Sovereign Debt

This essay characterizes the main actors and how they operate during a buildup of government foreign debt and after a default on payments. These actors are the borrowing governments, domestic and foreign commercial banks, purchasers of government bonds, other governments lending to the debtor, and multilateral institutions (the International Monetary Fund and development banks). As there is no international sovereign analog to national court-supervised bankruptcy in the case of countries, the workout from crises, mainly hitting poorer economies, occurs without legislated rules or an enforcement mechanism, although the IMF (sometimes with the World Bank) serves as an informal umpire for the global financial community.

The Government's Foreign Debt in the Argentine Crisis

AbstractThough the government had adopted a currency board regime since 1991, the Argentine economy suffered a currency crisis in 2002. It is shown that currency crises can arise, even under currency board systems in which the central bank has enough international reserves to respond to arbitrary withdrawals by individuals. The model implies that a government's rapid accumulation of foreign debt should be included as a major predictor of currency crises.

Iran's Macroeconomic Performance and Economic Liberalisation: 1990–2000

This article discusses the performance of the economy during the 1990s. Iran had to deal with restoring and sustaining economic growth; bringing about an increase in per capita income in spite of rapid population growth; expanding employment opportunities and promoting price stability. In the long-run, there was a need to change the nature of the economy and diversify away from heavy reliance on oil. In response to these challenges, the government launched an economic liberalisation programme. However, this article argues that the economic liberalisation plan could not overcome the internal and external imbalances that the economy was afflicted with. During the 1990s, inflation intensified and government foreign debt rose to high levels; and the main features of the Iranian economy such as oil and import dependency remained more or less unaffected. Thus, the measures adopted by the government were only able to partially correct the effects of macro imbalances.

Foreign debt and economic growth

This paper empirically examines the relationship between government foreign debt and the growth rate of per capita GDP based on a total sample of 77 countries, as well as sub‐samples of various regions. Cross‐sectional estimates of the coefficient of foreign debt based on the total sample have a negative sign, but are not always statistically significant. Available data from African countries indicate that foreign debt and the growth rate of per capita GDP were negatively related at a high level of significance. For industrialized and Latin American sub‐samples, this relationship is negative but statistically insignificant. The sub‐sample Asian and other developing countries show a positive but insignificant relationship.JEL classification: F34, H6, O23.

Changes in Finland's International Investment Position, 1985-1998

This paper attempts to describe and compare developments in the components of Finland's net international investment position (NIIP).The data consist of sectoral flows and valuation items over the period 1985 - 1998, which is, for analytical purposes, broken down into two subperiods: before and after the Finnish markka was floated.The study focuses on the main sectors, ie banks, corporations and the central government.Valuation items (changes in exchange rates and equity prices) are also important in the decomposition of the NIIP, particularly as regards recent history of equity prices.The mean and variability of each item is estimated, and for some items also bivariate robust variance tests are carried out. The major feature in Finland's balance of payments has been nonresidents' increased interest in Finnish equities as an object of investment.This phenomenon, along with the boom in share prices, has in recent years raised the equity holdings of foreigners to the rank of most significant item in Finland's international investment position.Another important feature in the BOP is the rapid growth of the central government's foreign debt due to the deep recession of 1991 - 1994.In respect to Finland, it is important to note the different stories told by developments in NIIP vs net external debt components: NIIP figures indicate that ownership of corporations based in Finland has indeed become global and that the value of shares has been increasing, whereas net external debt figures indicate that the economy has succeeded in restoring external indebtedness to pre-recession levels. The results also confirm that the Finnish banks still contribute prominently to variations in Finnish BOP flows.As regards the late 1980s and early 1990s, this can be inferred from the highly bank-oriented structure of Finnish financial markets, but the same holds true during the 1990s as well in the period of recovery from economic crisis.

Comparative statics of a two-country capital/money model

This paper presents a two country version of James Tobin's capital/money model, with international trade and capital transactions. The model is used to derive comparative static properties of financial market equilibrium under four alternative regimes: fixed or flexible exchange rates combined with a pegged foreign government interest rate or a fixed supply of foreign government debt. The comparative static results derived by Tobin for a closed economy, and by William Branson for a small country with an open economy, are preserved in the model developed here only in the case where both the exchange rate and the foreign interest rate are pegged. The reasons for this are explored.