Debt and Conditionality Under Endogenous Terms of Trade Adjustment

51 Pages Posted: 26 Jul 2010 Last revised: 24 Jul 2022

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics

Eduardo Borensztein

Inter-American Development Bank (IADB)

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Date Written: May 1988

Abstract

The purpose of this study is to identify conditions under which renewed international. lending will benefit both the developed and the developing countries. Our analysis will evaluate how the presence of terms of trade adjust-rent and distorted credit markets affect the conditions for the existence of beneficial lending. We demonstrate that in the presence of endogenous terms of trade adjustment, there are cases in which a competitive international banking system may not revitalize lending for investment purposes, even if such renewed lending is socially desirable, Renewed lending may require the appropriate conditionality, and the presence of endogenous terms of trade adjustment puts greater weight on investment conditionality.

Suggested Citation

Aizenman, Joshua and Borensztein, Eduardo, Debt and Conditionality Under Endogenous Terms of Trade Adjustment (May 1988). NBER Working Paper No. w2582, Available at SSRN: https://ssrn.com/abstract=1648026

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall 300
Los Angeles, CA 90089
United States

Eduardo Borensztein

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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