Foreign Borrowing and Export Promotion Policies

Know about the book -

Foreign Borrowing and Export Promotion Policies is written by International Monetary Fund and published by International Monetary Fund. It's available with International Standard Book Number or ISBN identification 145192321X (ISBN 10) and 9781451923216 (ISBN 13).

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.