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A Gravity Model of Sovereign Lending: Trade, Default, and Credit

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Listed:
  • Andrew K. Rose

    (International Monetary Fund)

  • Mark M. Spiegel

    (International Monetary Fund)

Abstract

One reason why countries service their external debts is the fear that default might lead to shrinkage of international trade. If so, then creditors should systematically lend more to countries with which they share closer trade links. We develop a simple theoretical model to capture this intuition, then test and corroborate this idea.

Suggested Citation

  • Andrew K. Rose & Mark M. Spiegel, 2004. "A Gravity Model of Sovereign Lending: Trade, Default, and Credit," IMF Staff Papers, Palgrave Macmillan, vol. 51(s1), pages 50-63, June.
    • Handle: RePEc:pal:imfstp:v:51:y:2004:i:s1:p:50-63
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    References listed on IDEAS

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    4. Rose, Andrew K., 2005. "One reason countries pay their debts: renegotiation and international trade," Journal of Development Economics, Elsevier, vol. 77(1), pages 189-206, June.
    5. Ozler, Sule, 1993. "Have Commercial Banks Ignored History?," American Economic Review, American Economic Association, vol. 83(3), pages 608-620, June.
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    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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