This paper introduces the concept of 'debt intolerance,' which manifests itself in
the extreme duress many emerging markets experience at debt levels that would seem
manageable by advanced country standards. We argue that 'safe' external debt-to-GNP
thresholds for debt intolerant countries are low, perhaps as low as 15 percent in
some cases. These thresholds depend on a country's default and inflation history.
Debt intolerance is linked to the phenomenon of serial default that has plagued many
countries over the past two centuries. Understanding and measuring debt intolerance
is fundamental to assess the problems of debt sustainability, debt restructuring,
capital market integration, and the scope for international lending to ameliorate
crises. Our goal is to make a first pass at quantifying debt intolerance, including
delineating debtors' clubs and regions of vulnerability, on the basis on a history
of credit events going back to the 1820s for over 100 countries.