External debt and debt intolerance: an empirical analysis

Abstract

The main task of this article is to assess the recent external debt dynamics and try to understand how this debt has evolved. Then, we discuss the main hypothesis associated with the well-known 'debt intolerance' approach. According to this approach the propensity to default of some developing countries is frequently associated with their history of default and inflation. Our empirical findings suggest that the way developing economies borrow, that is, the monetary denomination of the debt is still far more important to explain the debt dynamics than the domestic weakness in accepting default and fiscal avoidance.