01732cam a22002297 4500001000600000003000500006005001700011008004100028100001900069245011500088260006600203490004100269500002000310520082800330530006101158538007201219538003601291700002001327710004201347830007601389856003701465w1703NBER20140316083723.0140316s1985 mau||||fs|||| 000 0 eng d1 aCohen, Daniel.10aGrowth and External Debt Under Risk of Debt Repudiationh[electronic resource] /cDaniel Cohen, Jeffrey Sachs. aCambridge, Mass.bNational Bureau of Economic Researchc1985.1 aNBER working paper seriesvno. w1703 aSeptember 1985.3 aWe analyze the pattern of growth of a nation which borrows abroad and which has the option of repudiating its foreign debt. We show that the equilibrium strategy of competitive lenders is to make the growth of the foreign debt contingent on the growth of the borrowing country. We give a closed-form solution to a linear version of our model. The economy, in that case, follows a two-stage pattern of growth. During the first stage, the debt grows more rapidly than the economy. During the second stage, both the debt and the economy grow at the same rate, and more slowly than in the first stage. During this second stage, the total interest falling due on the debt is never entirely repaid; only an amount proportional to the difference of the rate of interest and the rate of growth of the economy is repaid each period. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.1 aSachs, Jeffrey.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w1703.4 uhttp://www.nber.org/papers/w1703