Working Paper: NBER ID: w4792
Authors: Michael P. Dooley; Eduardo Fernandez-Arias; Kenneth M. Kletzer
Abstract: This empirical study finds that while debt reduction and policy reforms in debtor countries have been important determinants of renewed access to international capital markets, changes in international interest rates have been the dominant factor. We calculate the effects of changes in international interest rates for a 'typical' debtor country. We conclude that increases in interest rates associated with business cycle upturn in industrial countries could depress the secondary market prices of existing debt to levels inconsistent with continued capital inflows.
Keywords: capital inflows; debt crisis; developing countries; international finance
JEL Codes: F34; F21; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| International interest rates (E43) | secondary market prices of existing debt (G12) |
| secondary market prices of existing debt (G12) | new capital inflows (F21) |
| Debt reduction and policy reforms in debtor countries (F34) | creditworthiness (F34) |
| creditworthiness (F34) | access to international capital markets (F30) |
| International interest rates (E43) | capital inflows (F21) |