Abstract
The origins of the contemporary debt crisis are usually traced to the imprudence both of creditors and borrowers in the years of the petro-dollars recycling feast. The debt ‘bubble’ burst through an ‘external shock’: the 1979–80 shift in the monetary policy stance of the international monetary regime’s hegemonic power. As a result interest (floating) rates bearing on most of the stock of debt shot up; world output and trade declined sharply; prices of primary commodities which account for most of the exports of indebted developing countries suffered a steep and prolonged downfall. The bankers stopped lending — with a lag — and the debtors were forced to adjust severely through demand policies which sank their economies into deep recessions, great monetary, fiscal and price upheavals, and huge capital flights.
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Notes
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© 1989 H. W. Singer and Soumitra Sharma
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Hopenhayn, B., Dinenzon, M. (1989). Debt and World Money. In: Singer, H.W., Sharma, S. (eds) Economic Development and World Debt. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-20044-3_15
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DOI: https://doi.org/10.1007/978-1-349-20044-3_15
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