Risks to Lenders and Borrowers in International Capital Markets

Benjamin E. Hermalin and Andrew Rose

No 6886, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides a framework for understanding the risks to borrowers and lenders in capital markets. We begin with a description of a capital markets in a domestic context. This allows us to focus on two key imperfections which lie at the heart of all financial systems: imperfect information, and the difficulty of making credible commitments for repayment. In the international context, these problems tend to be exacerbated. There are also two sources of risk in international borrowing that are absent in a purely domestic context: the risk that sovereign borrowers will default, and the risk of macroeconomic instability that stems from the impact of net capital flows on the monetary system.

JEL-codes: F3 G15 (search for similar items in EconPapers)
Date: 1999-01
New Economics Papers: this item is included in nep-cfn
Note: IFM
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Citations: View citations in EconPapers (20)

Published as Risks to Lenders and Borrowers in International Capital Markets , Benjamin Hermalin, Andrew K. Rose, Peter M. Garber, Andrew Crockett, David W. Mullins, Jr. in International Capital Flows , Feldstein. 1999

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Chapter: Risks to Lenders and Borrowers in International Capital Markets (1999)
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