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Foreign Borrowing and Export Promotion Policies

Author

Listed:
  • Eduardo Borensztein

    (International Monetary Fund)

  • Atish Rex Ghosh

    (International Monetary Fund)

Abstract

The problem of allocation of investment is an important issue for a debtor country facing a ceiling on the amount of foreign debt it can accumulate. The optimal solution is for the debtor country to create a more open economy by favoring investment in the export sector over investment in the import-competing sector. The reason is that a more open economy is more sensitive to trade sanctions and is therefore more creditworthy in international markets. Because international creditworthiness is basically an externality, policy can play a role in providing higher returns to export-producing activities.

Suggested Citation

  • Eduardo Borensztein & Atish Rex Ghosh, 1989. "Foreign Borrowing and Export Promotion Policies," IMF Staff Papers, Palgrave Macmillan, vol. 36(4), pages 904-933, December.
    • Handle: RePEc:pal:imfstp:v:36:y:1989:i:4:p:904-933
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    Citations

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    Cited by:

    1. Smita Nath, 2013. "Free Trade Zones and Outstanding Debt," Foreign Trade Review, , vol. 48(2), pages 203-218, May.
    2. Junko Koeda, 2008. "A Debt Overhang Model for Low-Income Countries," IMF Staff Papers, Palgrave Macmillan, vol. 55(4), pages 654-678, December.
    3. Ms. Junko Koeda, 2006. "A Debt Overhang Model for Low-Income Countries: Implications for Debt Relief," IMF Working Papers 2006/224, International Monetary Fund.
    4. Joshua Aizenman & Eduardo R. Borensztein, 1989. "Strategic Investment in a Debt Bargaining Framework," NBER Working Papers 3019, National Bureau of Economic Research, Inc.

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