Working Paper: NBER ID: w1689
Authors: Sebastian Edwards
Abstract: The purpose of this paper is to compare the pricing of bank loans and bonds in international markets. The results obtained, using data on LDC debtors, indicate that in both markets the country risk premium has responded to some of the variables suggested by the theory. However, the way in which these variables affect the risk premium differs across these markets. Data on LDC bond yields in the secondary market for 1980-85 are also used to analyze the way in which this market reacted and anticipated the debt crisis.
Keywords: international finance; developing countries; country risk; debt crisis
JEL Codes: F34; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market behavior (D40) | perceived risk of default (G33) |
| debt-output ratio (H63) | default risk premium (G12) |
| investment to GNP ratio (E20) | default risk premium (G12) |
| debt-output ratio (H63) | bond spreads (G12) |
| investment to GNP ratio (E20) | bond spreads (G12) |
| debt-output ratio (H63) | bank loan pricing (G21) |
| investment to GNP ratio (E20) | bank loan pricing (G21) |