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A Discourse on Debt and Economic Growth in the Caribbean Community

A Discourse on Debt and Economic Growth in the Caribbean Community. by Professor Compton Bourne, PhD, O.E. CONTEMPORARY DEBT SITUATION CARIBBEAN COUNTRIES ARE HIGHLY INDEBTED. Debt as % of GDP. y = af(k). s . Contribution of Debt to Economic Growth.

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A Discourse on Debt and Economic Growth in the Caribbean Community

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  1. A Discourse on Debt and Economic Growth in the Caribbean Community by Professor Compton Bourne, PhD, O.E.

  2. CONTEMPORARY DEBT SITUATION CARIBBEAN COUNTRIES ARE HIGHLY INDEBTED Debt as % of GDP

  3. y = af(k) s Contribution of Debt to Economic Growth n+w=k

  4. Debt Sustainability • Old Version Focuses on Debt Service Relative to Fiscal Revenues and Exports of Good and Services. Data Indicative of Problem of Diminution of Debt Capacity. • Modern Version Focuses on Primary Surplus. The Easterly Formulation – ∞ • ∫ e ‾rt (Tt + At - Gt) dt ≥ Do 0 • where T is tax revenues, • A is Net debt inflows, • G is government expenditures, • D is public debt stock, • and r is the discount rate

  5. Debt Sustainability p/(r-g) = Do/Yo Tt + At - Gt) /Yt = (r-g) Dt / Yt Interest Rates Rose and Economic Growth Rates Decreased 1997-2004 in the Caribbean causing the Required Primary Surplus to Increase

  6. Debt SustainabilityAnnual Growth Rate of Real GDP%

  7. Towards a Conclusion THE END

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