Debt Overhang, Liquidity Constraints and Adjustment Incentives:
Investment in most heavily indebted countries has been weak since 1982. The widely accepted debt overhang proposition interprets the investment drop as a moral hazard problem: a heavy debt burden raises the incentive to consume, because the marginal benefit of investment would go to the creditor. Th...
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| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Paris
OECD Publishing
1990
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| Schriftenreihe: | OECD Development Centre Working Papers
no.32 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | Investment in most heavily indebted countries has been weak since 1982. The widely accepted debt overhang proposition interprets the investment drop as a moral hazard problem: a heavy debt burden raises the incentive to consume, because the marginal benefit of investment would go to the creditor. This paper develops several hypotheses on optimal reactions of a credit-constrained debtor country on an increase in debt, on variations in the credit constraint, on changes in interest rates, and contrasts these with the predictions stemming from the debt overhang proposition. Empirical specifications of conventional investment functions and consumption functions (along the Permanent Income Hypothesis) lead to reject the debt overhang proposition, but find that the switch from positive to negative external transfers to the debtor countries is an important explanation for their investment drop. The major policy conclusion is that the 1989 shift in international debt management (the Brady ... |
| Beschreibung: | 1 Online-Ressource (33 p.) 21 x 29.7cm. |
| DOI: | 10.1787/356147450736 |
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| 520 | |a Investment in most heavily indebted countries has been weak since 1982. The widely accepted debt overhang proposition interprets the investment drop as a moral hazard problem: a heavy debt burden raises the incentive to consume, because the marginal benefit of investment would go to the creditor. This paper develops several hypotheses on optimal reactions of a credit-constrained debtor country on an increase in debt, on variations in the credit constraint, on changes in interest rates, and contrasts these with the predictions stemming from the debt overhang proposition. Empirical specifications of conventional investment functions and consumption functions (along the Permanent Income Hypothesis) lead to reject the debt overhang proposition, but find that the switch from positive to negative external transfers to the debtor countries is an important explanation for their investment drop. The major policy conclusion is that the 1989 shift in international debt management (the Brady ... | ||
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| spelling | Hofman, Bert VerfasserIn aut Debt Overhang, Liquidity Constraints and Adjustment Incentives Bert, Hofman and Helmut, Reisen Paris OECD Publishing 1990 1 Online-Ressource (33 p.) 21 x 29.7cm. Text txt rdacontent Computermedien c rdamedia Online-Ressource cr rdacarrier OECD Development Centre Working Papers no.32 Investment in most heavily indebted countries has been weak since 1982. The widely accepted debt overhang proposition interprets the investment drop as a moral hazard problem: a heavy debt burden raises the incentive to consume, because the marginal benefit of investment would go to the creditor. This paper develops several hypotheses on optimal reactions of a credit-constrained debtor country on an increase in debt, on variations in the credit constraint, on changes in interest rates, and contrasts these with the predictions stemming from the debt overhang proposition. Empirical specifications of conventional investment functions and consumption functions (along the Permanent Income Hypothesis) lead to reject the debt overhang proposition, but find that the switch from positive to negative external transfers to the debtor countries is an important explanation for their investment drop. The major policy conclusion is that the 1989 shift in international debt management (the Brady ... Development Reisen, Helmut MitwirkendeR ctb FWS01 ZDB-13-SOC FWS_PDA_SOC https://doi.org/10.1787/356147450736 Volltext |
| spellingShingle | Hofman, Bert Debt Overhang, Liquidity Constraints and Adjustment Incentives Development |
| title | Debt Overhang, Liquidity Constraints and Adjustment Incentives |
| title_auth | Debt Overhang, Liquidity Constraints and Adjustment Incentives |
| title_exact_search | Debt Overhang, Liquidity Constraints and Adjustment Incentives |
| title_full | Debt Overhang, Liquidity Constraints and Adjustment Incentives Bert, Hofman and Helmut, Reisen |
| title_fullStr | Debt Overhang, Liquidity Constraints and Adjustment Incentives Bert, Hofman and Helmut, Reisen |
| title_full_unstemmed | Debt Overhang, Liquidity Constraints and Adjustment Incentives Bert, Hofman and Helmut, Reisen |
| title_short | Debt Overhang, Liquidity Constraints and Adjustment Incentives |
| title_sort | debt overhang liquidity constraints and adjustment incentives |
| topic | Development |
| topic_facet | Development |
| url | https://doi.org/10.1787/356147450736 |
| work_keys_str_mv | AT hofmanbert debtoverhangliquidityconstraintsandadjustmentincentives AT reisenhelmut debtoverhangliquidityconstraintsandadjustmentincentives |