The Cost of Private Debt Over the Credit Cycle


Eugen Tereanu ; Johanna L. Francis ; Dilek Aykut

Publication Date:

December 1, 2010

Electronic Access:

Free Full Text. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate


We identify global and regional fluctuations in international private debt flows to emerging and developing countries using data on cross border loans and international bond issuance over 1993 -2009. We estimate the effects of individual borrower characteristics as well as macroeconomic conditions on the cost of foreign borrowing and test whether these effects differ across phases of the lending cycle. We find that public and financial institutions benefit from lower spreads compared to private and nonfinancial firms and that lenders may differentiate the risk associated with the borrower’s industrial sector between good and bad times. The loan (bond) rating has an equally robust spread reduction effect across credit cycle phases. The results also suggest that international reserve holdings and investment ratios have a significant effect on reducing credit spreads for loans, while higher reserve holdings and longer maturities matter more for bond spreads.


Working Paper No. 10/283


Publication Date:

December 1, 2010



Stock No:



$18.00 (Academic Rate:$18.00)





Please address any questions about this title to