IS THE DEBT CRISIS HISTORY - RECENT PRIVATE CAPITAL INFLOWS TO DEVELOPING-COUNTRIES

The outlook for economic development for an important group of middle- income countries has once again been buoyed by substantial private cap ital inflows in the 1990s. As in the 1970s, this development has been met with cautious optimism. This empirical study finds that although d ebt reduction and policy reforms in debtor countries have been importa nt determinants of renewed access to international capital markets, ch anges in international interest rates have been the dominant factor. W e calculate the effects of changes in international interest rates for a ''typical'' debtor country. We conclude that increases in interest rates associated with a business cycle upturn in industrial countries could depress the secondary market prices of existing debt to levels i nconsistent with continued capital inflows.