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Who Builds Up Foreign Debt And Who Brings It Down

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At the recent meeting of the American Political Science Association, Pacific‘s Professor Yong Kyun Kim presented a poster “Who Builds Up Foreign Debt and Who Brings It Down?”  His student attributes a great deal of change in foreign debt to political institutions.  Here is his abstract:

We present an empirical analysis of the political determinants
of foreign-debt buildup and reduction
in developing countries. Three interesting patterns
stand out. First, most factors exhibit nonlinearity
when the dependent variable’s sign changes. Federalism,
for instance, helps prevent a large debt
buildup but does not promote a large debt reduction.
Second, some factors are symmetric in the
sense that they accelerate or dampen changes in
both directions. Presidential systems are associated
with a significant rise in foreign debt as well as
with its big fall. Finally, the way many political institutions
are related to changes in foreign debt differs
significantly across different levels of democracy.
Governments with a larger share of seats in
the legislature and left governments are better able
to bring their foreign debt down only if they are
highly democratic. When highly autocratic, they
make it less likely to happen. We show that political
institutions as a whole explain a great deal
of variation in the increase and decrease of foreign
debt and that they do so in a complex manner.

You can see Professor Kim’s poster here: ykimapsa2011.

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