Previous studies of the debt crisis have examined either the impact of "overhangs" on developing economies or the effect of the depressed growth in these countries on developed nations through trade and financial linkages. In this paper. these two approaches are synthesised by encompassing debtors' supply and demand behaviour in u partial equilibrium framework. The preliminary results indicate both the significance of the debt overhang in debtor nations' production and consumption decisions, and tend to suggest that debt write-offs could lead to increases in demand for agricultural goods. The investigation of overhang reduction can potentially be used to help settle the current controversy on the size and distribution of impacts from debt forgiveness policies, thus contributing valuable insights into targeting and institutional debates.


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