IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/459.html
   My bibliography  Save this paper

The Price of LDC Debt

Author

Listed:
  • Cohen, Daniel
  • Portes, Richard

Abstract

We study the behaviour of secondary market prices for the debt of seven LDCs for the period March 1986 through November 1989 (monthly data). These prices for long-term debt appear to be driven by a set of `common factors' across countries. One of these is the interest rate, Libor; we found a unit elasticity w.r.t. Libor for the average (across countries) price and for pooled data. The other `common factors' are not correlated with world macro variables, and we call these factors common only to the indebted countries the `systemic risk'. We then study the price of long-term debt relative to that of short-term debt (data for three major countries). The price of short-term debt is influenced neither by `systemic risk' nor by economic factors specific to the debtor country; we conjecture it is driven by local political risk. The results suggest that when it is serviced, long-term debt payments reflect the country's resources (export prices). The decision to service is contingent upon servicing short-term debt and on `systemic risk', which appears not to be a risk of `once-for-all' default but rather a milder form that simply alters on a period-by-period basis, but never irrevocably, the incentive of debtors to service their debt.

Suggested Citation

  • Cohen, Daniel & Portes, Richard, 1990. "The Price of LDC Debt," CEPR Discussion Papers 459, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:459
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=459
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dooley, Michael & Fernandez-Arias, Eduardo & Kletzer, Kenneth, 1996. "Is the Debt Crisis History? Recent Private Capital Inflows to Developing Countries," The World Bank Economic Review, World Bank, vol. 10(1), pages 27-50, January.
    2. Claessens,Constantijn A. & Pennacchi, George, 1992. "Deriving developing country repayment capacity from the market prices of sovereign debt," Policy Research Working Paper Series 1043, The World Bank.
    3. Michael P. Dooley & Eduardo Fernandez-Arias & Kenneth M. Kletzer, 1994. "Recent Private Capital Inflows to Developing Countries: Is the Debt Crisis History?," NBER Working Papers 4792, National Bureau of Economic Research, Inc.
    4. Fernandez-Arias, Eduardo, 1996. "The new wave of private capital inflows: Push or pull?," Journal of Development Economics, Elsevier, vol. 48(2), pages 389-418, March.
    5. Gooptu, Sudarshan & Martinez Peria, Maria Soledad, 1992. "Factors that affect short-term commercial bank lending to developing countries," Policy Research Working Paper Series 886, The World Bank.
    6. Alan Alford & Jacques Lussier, 1993. "An Examination of the Price Discount on the External Debt of Developing Countries," The World Economy, Wiley Blackwell, vol. 16(6), pages 713-724, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:459. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.