Working Paper: NBER ID: w6408
Authors: Barry Eichengreen; Ashoka Mody
Abstract: In this paper we analyze data on nearly 1,000 developing-country bonds issued in the years 1991-96 the recent episode of heavy reliance on bonded debt. We analyze both the issue decision of debtors and the pricing decision of investors, minimizing selectivity bias by treating the two issues jointly. Overall, the results confirm that higher credit quality translates into a higher probability of issue and a lower spread. Importantly, however, we find that observed changes in fundamentals explain only a fraction of the spread compression in the period leading up to the recent crisis in emerging markets.
Keywords: No keywords provided
JEL Codes: F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher credit quality (G32) | higher probability of issuing debt (H74) |
| higher credit quality (G32) | lower spread (D39) |
| observed changes in fundamentals (F31) | spread compression (F62) |