Optimal debt? On the insurance value of international debt flows to developing countries
According to reputation models of sovereign debt, the incentives to repay are proportional to the income insurance benefits provided by the access to international markets. This paper, however, documents that private net lending to developing countries exhibits a procyclical or acyclical pattern, co...
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2009
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| Acceso en línea: | https://bibliotecadigital.exactas.uba.ar/collection/paper/document/paper_09237992_v20_n4_p489_Yeyati http://hdl.handle.net/20.500.12110/paper_09237992_v20_n4_p489_Yeyati |
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| Sumario: | According to reputation models of sovereign debt, the incentives to repay are proportional to the income insurance benefits provided by the access to international markets. This paper, however, documents that private net lending to developing countries exhibits a procyclical or acyclical pattern, contradicting this premise. By contrast, official debt net flows exhibit a countercyclical patter. In addition, the paper shows that (both current and past) defaults are associated with lower net debt flows. The findings suggest that, while reputation models may explain the preferred creditor status enjoyed by official lenders, they cannot account for the presence of sovereign debt markets in developing countries. © Springer Science+Business Media, LLC 2008. |
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