Credit Rationing in Emerging Economies' Access to Global Capital Markets

Edda Zoli

No 2004/070, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; credit rationing; debt; emerging market; treasury bill; sovereign debt; international lending; moral hazard; financial crises; supply curve; GDP in denominator; debt level; risk neutrality; bond index; GDP in numerator; Emerging and frontier financial markets; Interbank rates; Global (search for similar items in EconPapers)
Pages: 30
Date: 2004-04-01
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Citations: View citations in EconPapers (12)

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