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Towards a solution of developing countries' debt crisis: Strengthening the weakest link

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  • König, Peter

Abstract

All current proposals and initiatives to a solution of the debt crisis of developing countries focus on the financial problems associated with the crisis, i.e. the level of external debt outstanding or the debt service payments, respectively. The link to the real sphere of the debtor countries is given via the adjustment programs surveyed by the International Monetary Fund (IMF) and the World Bank (IBRD). On the other hand, trade relations of and especially amongst the highly indebted countries have shown to be disrupted by the debt crisis. Establishing an International Fund for Trade Adjustment (IFTA) liable for stabilizing those trade flows instead of coordinating merely financial adjustments could provide an effective assistance in strengthening the economic performance of those countries with respect to their solvency.

Suggested Citation

  • König, Peter, 1989. "Towards a solution of developing countries' debt crisis: Strengthening the weakest link," Discussion Papers, Series II 94, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:94
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    References listed on IDEAS

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    1. Paul R. Krugman, 1988. "Market-Based Debt-Reduction Schemes," NBER Working Papers 2587, National Bureau of Economic Research, Inc.
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    3. Stanley Fischer, 1987. "Resolving the International Debt Crisis," NBER Working Papers 2373, National Bureau of Economic Research, Inc.
    4. Michael Frenkel, 1989. "The international debt problem: An analysis of the Brady plan," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 24(3), pages 110-116, May.
    5. Rudiger Dornbusch, 1984. "On the Consequences of Muddling Through the Debt Crisis," The World Economy, Wiley Blackwell, vol. 7(2), pages 145-162, June.
    6. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435, National Bureau of Economic Research, Inc.
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