Debtor Nation - Explained
What is a Debtor Nation?
Written by Jason Gordon
Updated at April 25th, 2022
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Table of Contents
What is a Debtor Nation?How to Identify a Debtor Nation?Academic Research on Debtor NationsWhat is a Debtor Nation?
A nation who owes more to the other countries than its total investments in foreign lands is called a debtor nation. In other words, it is a country with a cumulative balance of payment deficit. A debtor nation invests fewer resources worldwide than the other countries cumulatively invest in it.
Back to:ECONOMIC ANALYSIS & MONETARY POLICY
How to Identify a Debtor Nation?
An individual or an entity who owes money or any other benefits to some other entity or individual is called a debtor or borrower. A nation who owes to other nations is called debtor nation. After calculating the total investments made worldwide, a debtor nations net investment stands negative. The USA is considered to be a debtor nation, as it owes more to the other countries than other nations owes to it. Among other debtor countries, there are Greece, Portugal, Brazil, India, and others. The total money and exports sent out to the other countries by a debtor nation are lower than the money coming into the country, so it faces trade deficit. When demand in a country is higher than the production necessary to meet that demand, the country imports goods from foreign countries to meet that demand. The result is a trade deficit. There are benefits and detriments to this. Importing foreign goods and services allows the people of the country to have more choices available to them. Also, importing increases the foreign competition which often leads to a decreased price of consumer goods in the country. The negative is that there is generally a loss of production jobs in the country purchasing the cheaper foreign goods. This can lower economic demand as these workers have lose a source of recurring income.
Related Topics
- Trade Balance: Surplus and Deficit
- Level of Trade
- Gain from Trade
- Intra-Industry Trade
- National Trade Data Bank
- Capital Account (Economics)
- Current Account
- Debtor Nation
- Merchandise Trade Balance
- Export of Goods and Services and Percentage of GDP
- Heckscher-Ohlin Model
- Linder Hypothesis