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BOON OR BURDEN? THE EFFECT OF PRIVATE SECTOR DEBT ON THE RISK OF SOVEREIGN DEFAULT IN DEVELOPING COUNTRIES
Author(s) -
CELASUN OYA,
HARMS PHILIPP
Publication year - 2011
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2010.00267.x
Subject(s) - sovereign default , private sector , developing country , default , economics , monetary economics , sovereignty , debt , external debt , financial system , sovereign debt , business , finance , economic growth , politics , political science , law
We explore how the share of the private sector in total external debt affects perceived creditworthiness and the likelihood of sovereign default in developing countries. While there are theoretical arguments both in favor and against a stabilizing role of private‐sector borrowing, the evidence supports the notion that a greater share of the private sector in total external debt is associated with a reduced likelihood of sovereign default. ( JEL F34, O16)