A conceptual approach to the analysis of external debt of the developing countries.
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TextSeries: World Bank Staff Working paper; No. 421Publication details: Washington : World Bank, 1980.Subject(s): Summary: This paper postulates that debt crisis might result either from solvency problems or liquidity problems. It argues that the external debt of most developing countries will increase for the foreseable future and that crisis occur when the "refunding mechanism" breaks down, either because the lenders are reluctant to extend new credits as they mature, or because the borrowers are reluctant to refinance due to the very high short-term effective interest cost.
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This paper postulates that debt crisis might result either from solvency problems or liquidity problems. It argues that the external debt of most developing countries will increase for the foreseable future and that crisis occur when the "refunding mechanism" breaks down, either because the lenders are reluctant to extend new credits as they mature, or because the borrowers are reluctant to refinance due to the very high short-term effective interest cost.
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