Credit Rationing in Emerging Economies' Access to Global Capital Markets
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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.
Series:
Working Paper No. 2004/070
Subject:
Emerging and frontier financial markets External debt Financial crises Financial markets Financial sector policy and analysis Financial services Interbank rates Moral hazard
English
Publication Date:
April 1, 2004
ISBN/ISSN:
9781451849189/1018-5941
Stock No:
WPIEA0702004
Pages:
30
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