For dozens of developing countries, the financial upheavals of the 1980s
have set back economic development by a decade or more. Poverty in those
countries have intensified as they struggle under the burden of an
enormous external debt. In 1988, more than six years after the onset of
the crisis, almost all the debtor countries were still unable to borrow
in the international capital markets on normal terms. Moreover, the
world financial system has been disrupted by the prospect of widespread
defaults on those debts. Because of the urgency of the present crisis,
and because similar crises have recurred intermittently for at least 175
years, it is important to understand the fundamental features of the
international macroeconomy and global financial markets that have
contributed to this repeated instability.
Developing Country Debt and the World Economy contains nontechnical
versions of papers prepared under the auspices of the project on
developing country debt, sponsored by the National Bureau of Economic
Research. The project focuses on the middle-income developing countries,
particularly those in Latin America and East Asia, although many lessons
of the study should apply as well to other, poorer debtor countries. The
contributors analyze the crisis from two perspectives, that of the
international financial system as a whole and that of individual debtor
countries.
Studies of eight countries--Argentina, Bolivia, Brazil, Indonesia,
Mexico, the Philippines, South Korea, and Turkey--explore the question
of why some countries succumbed to serious financial crises while other
did not. Each study was prepared by a team of two authors--a U.S.-based
research and an economist from the country under study. An additional
eight papers approach the problem of developing country debt from a
global or systemic perspective. The topics they cover include the
history of international sovereign lending and previous debt crises, the
political factors that contribute to poor economic policies in many
debtor nations, the role of commercial banks and the International
Monetary Fund during the current crisis, the links between debt in
developing countries and economic policies in the industrialized
nations, and possible new approaches to the global management of the
crisis.