Credit Rationing in Emerging Economies' Access to Global Capital Markets

April 1, 2004

Preview Citation

Format: Chicago

Edda Zoli. Credit Rationing in Emerging Economies' Access to Global Capital Markets, (USA: International Monetary Fund, 2004) accessed September 20, 2024

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

Summary

This paper tests empirically the theoretical prediction that the country premium paid by emerging economies on sovereign debt increases with the amount of debt up to a certain critical level, above which the supply of foreign funds becomes fixed. The results confirm this theoretical prediction. The approach developed in the paper is also used to test for the presence of moral hazard in international lending. The results indicate significant changes in the supply of funds curve consistent with the presence of moral hazard in the period immediately following the Mexican rescue operation, but not after the Russian non-bailout.

Subject: Emerging and frontier financial markets, External debt, Financial crises, Financial markets, Financial sector policy and analysis, Financial services, Interbank rates, Moral hazard

Keywords: Bond index, Credit rationing, Debt, Debt level, Emerging and frontier financial markets, Emerging market, Financial crises, GDP in denominator, GDP in numerator, Global, Interbank rates, International lending, Moral hazard, Risk neutrality, Sovereign debt, Supply curve, Treasury bill, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/070
Stock No:

WPIEA0702004
ISBN:

9781451849189
ISSN:

1018-5941

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