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(DP 1984-04) Growth in Spasmodia: Foreign Borrowing and Crisis
UPSE Discussion Papers
View Archive Info| Field | Value | |
| Title |
(DP 1984-04) Growth in Spasmodia: Foreign Borrowing and Crisis
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| Creator |
Fabella, Raul V.
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| Description |
We construct a dynamic decision model where foreign borrowing figures as one of the instruments to maximize welfare over a planning horizon. We hypothesize a relation, a rather reasonable one, between the repayment schedule and the debt ceiling. For every period, there exists an optimal per capita debt, which together with the optimal consumption path leads in a sustainable fashion to maximal long-run welfare. In the short run, however, one can actually to better by borrowing exceeding the optimal debt but this path leads for a balance of payments crisis as the debt catches up with the ceiling. The economy goes into a spasm as it resorts to drastic measures. A regime with short memory may mount yet another assault on the debt ceiling and suffer the same fate. Myopia leads to a dismal long-run growth record.
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| Publisher |
UPSE Discussion Papers
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| Contributor |
—
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| Date |
2010-08-31
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/299
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| Source |
UPSE Discussion Papers; 1984
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| Language |
eng
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| Relation |
http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/299/362
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