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What's in a default? Lending to LDCs in the face of default risk

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  • Easton, Stephen T.
  • Rockerbie, Duane W.

Abstract

This paper develops an expected profit maximizing framework for characterizing the default risk associated with international lending during the early and mid-1980's. We identify the risk of default as associated with arrears in payments rather than rescheduling of principal or interest.
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Suggested Citation

  • Easton, Stephen T. & Rockerbie, Duane W., 1999. "What's in a default? Lending to LDCs in the face of default risk," Journal of Development Economics, Elsevier, vol. 58(2), pages 319-332, April.
    • Handle: RePEc:eee:deveco:v:58:y:1999:i:2:p:319-332
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    1. Hernandez-Trillo, Fausto, 1995. "A model-based estimation of the probability of default in sovereign credit markets," Journal of Development Economics, Elsevier, vol. 46(1), pages 163-179, February.
    2. Nadeem Ul Haque & Manmohan S. Kumar & Nelson Mark & Donald J. Mathieson, 1996. "The Economic Content of Indicators of Developing Country Creditworthiness," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 688-724, December.
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    5. repec:ags:ucdavw:225633 is not listed on IDEAS
    6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    7. Lee, Suk Hun, 1993. "Are the credit ratings assigned by bankers based on the willingness of LDC borrowers to repay?," Journal of Development Economics, Elsevier, vol. 40(2), pages 349-359, April.
    8. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    9. Edwards, Sebastian, 1984. "LDC Foreign Borrowing and Default Risk: An Empirical Investigation, 1976-80," American Economic Review, American Economic Association, vol. 74(4), pages 726-734, September.
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    12. International Monetary Fund, 1996. "The Economic Content of Indicators of Developing Country Creditworthiness," IMF Working Papers 1996/009, International Monetary Fund.
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    Cited by:

    1. Péter Benczúr & Cosmin L. Ilut, 2016. "Evidence for Relational Contracts in Sovereign Bank Lending," Journal of the European Economic Association, European Economic Association, vol. 14(2), pages 375-404.
    2. Samir Jahjah & Bin Wei & Vivian Zhanwei Yue, 2013. "Exchange Rate Policy and Sovereign Bond Spreads in Developing Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(7), pages 1275-1300, October.
    3. Nath, Hiranya K., 2009. "Country Risk Analysis: A Survey of the Quantitative Methods," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 62(1), pages 69-94.
    4. Mark Wright, 2018. "The Seniority Structure of Sovereign Debt," 2018 Meeting Papers 928, Society for Economic Dynamics.
    5. P. Hammer & A. Kogan & M. Lejeune, 2011. "Reverse-engineering country risk ratings: a combinatorial non-recursive model," Annals of Operations Research, Springer, vol. 188(1), pages 185-213, August.
    6. Polat, Tandogan, 2016. "Essays on banking sector’s dynamics, expectations, preferences and impact," Other publications TiSEM d064f029-f91e-47bc-b6d3-0, Tilburg University, School of Economics and Management.
    7. Peter Benczur & Cosmin Ilut, 2011. "Evidence for Dynamic Contracts in Sovereign Bank Lending," Working Papers 11-06, Duke University, Department of Economics.
    8. Martin Steinwand & Randall Stone, 2008. "The International Monetary Fund: A review of the recent evidence," The Review of International Organizations, Springer, vol. 3(2), pages 123-149, June.
    9. Stephen Easton & Duane Rockerbie, 1999. "Does IMF conditionality benefit lenders?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 135(2), pages 347-357, June.

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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