In contrast to the standard capital structure theory prediction that builds on a trade-o¤ between interest tax shields and expected bankruptcy costs, public …rms use debt quite conservatively. To address this well known debt conservatism puzzle (Graham 2000), I argue that servicing debt drains valuable liquidity for a …nancially constrained …rm and hence endogenously creates ‘debt servicing cos...

This paper examines the impact of foreign aid on public sector fiscal behaviour in Côte d’Ivoire. A special interest is the relationship between aid, debt servicing and debt, given that Côte d’Ivoire is a highly indebted country. The theoretical model employed differs from those of previous studies by highlighting the interaction between debt servicing and the other fiscal variables. This model...

This study examines the interaction between external debt and economic growth, and analyses the sustainability of Nigeria’s foreign debt. Given the several reschedulings and persistent accumulation of the debt arrears, and consistently high debt burden ratios, it is doubtful if the debt burden can be judged as sustainable. This study employed analytical method and the findings from the analysis...

This paper empirically investigates the importance of various economic factors in determining debt servicing capacity of borrowing countries. The paper builds on earlier work by Frank and Cline (1971) and Dhonte (1975) who tried to identify empirically the more important factors. Using logit analysis and significance tests, this paper suggests several factors which are important determinants of...

The debt crisis, and the IMF-sponsored stabilization programs enacted in response to it, have resulted in an excessive degree of ansterity for several of the debtor countries. The current creditor strategy, it is argued, is not sustainable over the long term unless the debtor countries are allowed to grow. The author advocates a more generous treatment of debt servicing requirements, in the for...

We analyze a model of optimal capital structure and liquidity choice based on a dynamic tradeoff theory for financially constrained firms. In addition to the classical tradeoff between the expected tax advantages of debt financing and bankruptcy costs, we introduce a cost of external financing for the firm, which generates a precautionary demand for cash and an optimal retained earnings policy ...

The Philippine government spent around 17 percent of GDP in 2004. A huge part of this expenditure, however, goes to debt servicing. At present, total public debt is 109.8 percent of GDP. With what is left, only one percent is spent for health and three percent for education. With such budget constraint, it is important to examine the efficiency of spending on social services as small changes ca...