Testing creditor moral hazard in sovereign bond markets: A unified theoretical approach and empirical evidence

Ayşe Y. Evrensel and Ali Kutan

No B 09-2004, ZEI Working Papers from University of Bonn, ZEI - Center for European Integration Studies

Abstract: This paper critically evaluates the existing empirical literature on creditor moral hazard in sovereign bond markets, proposes a unified theoretical approach to test for IMF-induced creditor moral hazard, and provides empirical evidence, using daily sovereign bond market spreads of Indonesia and Korea. The results suggest that IMF-related news regarding program negotiations and approval may be associated with creditor moral hazard, but their impact on spreads is short-lived, indicating that creditor moral hazard could be best described as a short-run phenomenon.

JEL-codes: F32 F33 F34 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Testing Creditor Moral Hazard in Sovereign Bond Markets: A Unified Theoretical Approach and Empirical Evidence (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zeiwps:b092004

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