High ratios of external debt to GDP in selected Asian countries have contributed to the initiation, propagation, and severity of the financial and economic crises in recent years, reflecting runaway fiscal deficits and excessive foreign borrowing by the private sector.

• Position: Conferences

High ratios of external debt to GDP in selected Asian countries have contributed to the initiation, propagation, and severity of the financial and economic crises in recent years, reflecting runaway fiscal deficits and excessive foreign borrowing by the private sector. Applying the formal framework proposed by Villanueva (2003) to a selected group of Asian countries, Mariano and Villanueva estimate the external debt thresholds beyond which further debt accumulation will have negative effects on growth and will become unsustainable. Their framework extends the standard neoclassical growth model that incorporates global capital markets. "Sustainability" is measured in terms of the steady-state ratio of the stock of external debt-to-GDP, as functions of...