Contract Enforcement, Institutional Stability, and the Level and Maturity of International Debt

Wasseem Mina () and Jorge Martinez-Vazquez ()

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: Contract enforcement and institutional stability play an important role in determining the level and maturity of international debt. Contract enforcement is modeled as a fixed cost that investors incur to obtain the contracted, gross returns on international investments. Institutional stability is modeled as the probability that the same contract enforcement cost will persist over time. Countries with poor contract enforcement and institutionally unstable impose higher contract enforcement costs and increase uncertainty about their structure. The level and maturity of international debt is reduced as a result. The empirical estimation provides support for the hypothesis. Stronger contract enforcement and institutional stability increase international lending and lengthen its maturity.

Keywords: Contract enforcement; Institutions; Stability; International Lending; Maturity (search for similar items in EconPapers)
Pages: 37 pages
Date: 2006-05-01
New Economics Papers: this item is included in nep-dev, nep-fin and nep-fmk
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper0617

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