The Impact of International Indebtedness on the Import-Export Sectors of Developing Countries

This paper tests the causal relationship between the international indebtedness in the 1970s which was followed by the debt crisis in the 1980s and the import and export flows of developing countries. In the overwhelming majority of cases from a sample of 55 countries facing debt difficulties no evidence of causality was found from indebtedness alone or from its combination with exports to imports, nor from indebtedness to exports. These findings cast serious doubts as to whether the inflows of foreign funds contributed to the economic development or the export orientation of debtor nations. [O1, F34]