About analytical developments in the 1960s that brought about a distinct view of modelling international debt and its role in the economy
This paper contributes to the history of optimal growth theory by covering a series of analytical developments during the late 1960s that would bring about a distinct view of modelling international debt and its role in the economy.
Models of optimal growth were mostly closed economy models, as conceptions of borrowing within this choice theoretic framework mainly abstracted from whether it is international or domestic borrowing that is smoothing consumption. Yet, this paper examines some important exceptions to this. The paper’s focus is the introduction of international borrowing in an optimising framework that took place through two distinct pathways: the development of optimal growth theory in the Ramsey-Cass Koopmans tradition and the development of overlapping generations model with international debt.