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Foreign Borrowing and Export Promotion Policies
Author:
International Monetary Fund
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Series:
IMF Working Papers
Volume/Issue:
Volume 1989: Issue 016
Language:
English
Publication Date:
01 Jan 1989
DOI:
https://doi.org/10.5089/9781451923216.001
ISBN:
9781451923216
ISSN:
1018-5941
Pages:
46
Keywords:
WP; mn mathvariant; debtor country; interest rate; export sector; credit ceiling; credit supply function; investment adjustment; export promotion policy; Exports; Credit; Credit ceilings; Imports
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper considers the problem of allocation of investment for a debtor country that faces a ceiling on the amount of foreign debt it can accumulate. It shows that it is optimal for the debtor country to create a more open economy by favoring investment in the export sector over investment in the import-competing sector. The reason is that a more open economy is more sensitive to trade sanctions and therefore more creditworthy in international markets. Because international creditworthiness is basically an externality, there is a role for policy to provide higher returns to export producing activities.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund