I study how, in the presence of default risk, the Dutch disease amplifies an inefficiency in the sectoral allocation of capital. I develop a sovereign default model with production of tradable and non-tradable goods, and endowments of commodities. Default incentives increase when more capital is...

Today the major economic problem of the developing nation is the effect and volatility of debt on the real development of the economy. Debt volume continues to increase while the GDP either remain constant or increase at a reduced marginal rate. The ordinary least square regression analysis and...