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Foreign debt and capital accumulation

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  • Siebert, Horst

Abstract

In an open economy, a country may borrow in order to accumulate capital. The paper compares the case of foreign borrowing with a scenario in which a country accumulates capital internally by postponing consumption. The impact of borrowing on the time profile of consumption and of debt is analyzed. The model also specifies the time profile of the balance of trade. The opportunity costs of borrowing are studied and conditions are specified in which it is worthwhile to borrow. In the context of the model, some phenomena are discussed that may make it more difficult for the debtor country to pay interest and repay debt and that may be an inducement to breach the credit contract.
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Suggested Citation

  • Siebert, Horst, 1987. "Foreign debt and capital accumulation," Open Access Publications from Kiel Institute for the World Economy 1351, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkie:1351
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    File URL: https://www.econstor.eu/bitstream/10419/1351/3/259147419.pdf
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    References listed on IDEAS

    as
    1. Buiter, Willem H, 1981. "Time Preference and International Lending and Borrowing in an Overlapping-Generations Model," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 769-797, August.
    2. Bade, Robin, 1972. "Optimal Growth and Foreign Borrowing with Restricted Mobility of Foreign Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 544-552, October.
    3. Chipman, John S., 1985. "A two-period model of international trade and payments," Discussion Papers, Series I 194, University of Konstanz, Department of Economics.
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    Citations

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    Cited by:

    1. Siebert, Horst, 1990. "Wege aus der Verschuldungskrise," Kiel Working Papers 435, Kiel Institute for the World Economy (IfW Kiel).
    2. Siebert, Horst, 1989. "Güterwirtschaftliche Anpassungsprozesse zur Lösung der Verschuldungsfrage," Kiel Working Papers 349, Kiel Institute for the World Economy (IfW Kiel).
    3. Siebert, Horst, 1988. "Ansatzpunkte zur Lösung der internationalen Verschuldungsfrage," Open Access Publications from Kiel Institute for the World Economy 1374, Kiel Institute for the World Economy (IfW Kiel).
    4. Horst Siebert, 1989. "The half and the full debt cycle," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(2), pages 217-229, June.
    5. Ziesemer, Thomas, 1995. "Growth with imported capital goods, limited export demand and foreign debt," Journal of Macroeconomics, Elsevier, vol. 17(1), pages 31-53.
    6. repec:zbw:bofrdp:1989_036 is not listed on IDEAS
    7. Peura, Tapio, 1989. "An assessment of current account imbalance," Bank of Finland Research Discussion Papers 36/1989, Bank of Finland.
    8. Long, Ngo Van & Siebert, Horst, 1989. "Optimal foreign borrowing: the impact of the planning horizon on the half and full debt cycle," Kiel Working Papers 348, Kiel Institute for the World Economy (IfW Kiel).
    9. Peura, Tapio, 1989. "An assessment of current account imbalance," Research Discussion Papers 36/1989, Bank of Finland.
    10. Hentschel, Jesko, 1988. "Non-optimizing growth-cum-debt models and sustainability of indebtedness," Discussion Papers, Series II 44, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    11. Paul Brenton & Daniel Gros & Axel Schimmelpfennig & Andreas Gröhn & Richard Promfret & Sung-Hoon Park & Jörg-Volker Schrader & Dieter Bender & Michael Stolpe, 1998. "Book Reviews," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(1), pages 140-156, March.
    12. Long, Ngo V. & Siebert, Horst, 1988. "Optimal foreign borrowing: Sensitivity analysis with respect to the planning horizon," Discussion Papers, Series II 59, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".

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