External Debt and Liabilities: Evidence from a Cross Section of Countries*

Abstract

This paper tests a simple open economy growth model on a cross section of OECD countries. The predictions are that the savings rate and population growth rate significantly affect net foreign asset positions. We test these predictions and find support for this hypothesis. We also use this as a starting point to test for additional explanations for the variety of net foreign asset changes during the 1980s. We reject the hypotheses that low productivity or low export penetration, or tight monetary policy has any effect upon net asset accumulation across the OECD countries. These relate to policy debates within Australia. We find the evidence on the effect of fiscal policy on net asset positions is ambiguous, that rates of immigration have no effect on net asset positions, and that tax and inflation distortions are significant in explaining net foreign asset or liability positions.

Determinants of External Debt: The Case of Malaysia

“…Secondly, the effectiveness of a country's economic and political policies has direct influence on the amount of debt that can be given or sought (Cumberworth & Milbourne, 1996). Countries with extensive foreign policies such as super powers rely on external debt to gain power and prominence in global politics.…”

A Strongly Conditional Case for High Immigration

“…Using data from 19 of the 2 3 OECD countries, Cumberworth and Milbourne (1996) have found that the net foreign liabilities of a small open economy are predicted by the saving rate and the rate of natural population growth, though not by other indicators. Using data from 19 of the 2 3 OECD countries, Cumberworth and Milbourne (1996) have found that the net foreign liabilities of a small open economy are predicted by the saving rate and the rate of natural population growth, though not by other indicators.…”

“…This argument would lack force if our exports were differently composed and were therefore as closely related to the size of the workforce as imports are to the size of the population. Using data from 19 of the 2 3 OECD countries, Cumberworth and Milbourne (1996) have found that the net foreign liabilities of a small open economy are predicted by the saving rate and the rate of natural population growth, though not by other indicators. The rate of immigration lacks such explanatory power, presumably because migrants on average bring some capital with them and have mostly been educated in their homelands at the homelands' expense.…”

Accounting for Growth and Output Gaps: Evidence from New Zealand

“…See, for example,Milbourne (1995Milbourne ( , 1997, andCumberworth and Milbourne (1996) for exceptions within the latter framework, and for critiques of the use of closed-economy models for representing open economies. See alsoBodman (1998) for an econometric study of the relationship between openness, migration and economic growth.…”