American Economic Policy and the International Debt Crisis

29 Pages Posted: 25 Jun 2001 Last revised: 28 Aug 2022

See all articles by Hans-Werner Sinn

Hans-Werner Sinn

CESifo (Center for Economic Studies and Ifo Institute); National Bureau of Economic Research (NBER); Ludwig Maximilian University of Munich (LMU)

Date Written: December 1990

Abstract

This paper advances the hypothesis that the world debt crisis was mainly induced by the dramatic rise of US interest rates in the first half of the eighties. It sees this rise in interest rates primarily as a result of a tight US monetary policy and excessively large investment incentives provided by the 1981 Us tax reform. A welfare analysis shows that the policies could have increased the US advantage from lending its capital abroad, had they been more moderately designed. The actual policies, however, were by far too strong to produce this result.

Suggested Citation

Sinn, Hans-Werner, American Economic Policy and the International Debt Crisis (December 1990). NBER Working Paper No. w3532, Available at SSRN: https://ssrn.com/abstract=274549

Hans-Werner Sinn (Contact Author)

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