The Determinants of the Secondary Market Price of Less Developed Countries’ Debt

Hossein Kazemi and Ayla Ogus Binatli

Atlantic Economic Journal, 2008, vol. 36, issue 2, 153-164

Abstract: A present-value model of less developed countries’ (LDC) debt is developed to understand the factors that affect the discount on the secondary market. LDC debt trades at a substantial discount on the secondary market. This paper investigates the determinants of the discount for a sample of 13 countries over a 9 year period. The findings show that debt–exports, foreign currency reserves–imports and total debt service to exports ratios are significant determinants of the secondary market prices of LDC debt. The discount is higher in countries where debt–exports ratios are higher and is lower for those with lower foreign currency reserves–imports ratios. Concentration of debt with money center banks has a positive and significant effect on the secondary market price of debt. Copyright International Atlantic Economic Society 2008

Keywords: Debt default; Fixed-effects; LDC debt; Secondary market prices; F30; F39 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:kap:atlecj:v:36:y:2008:i:2:p:153-164

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DOI: 10.1007/s11293-008-9112-3

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