International Interdependence and the Debt Problem

Abstract

There is little doubt that the current levels and composition of developing countries’ debts present a serious threat to the survival of the international financial system. Not surprisingly, the possibility of a global financial upheaval has inspired a large and rapidly growing literature covering a wide range of issues. Yet it is far from clear that the debate has been very successful in isolating the real origin of the problem. In the debt drama, as in a detective story, the real culprit is not necessarily one of the main suspects, even though the latter may be guilty of many serious offences.

This chapter was written jointly with Manmohan Kumar and was first published in S. Borner and A. Taylor (eds), Structural Change, Economic Interdependence and World Development, Proceedings of the Seventh World Congress of the International Economic Association, Macmillan, London, 1987.