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The Pricing of Bonds and Bank Loans in International Markets: An Empirical Analysis of Developing Countries' Foreign Borrowing

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  • Sebastian Edwards

Abstract

The purpose of this paper is to compare the pricing of bank loans and bonds in international markets. The results obtained, using data on LDC debtors, indicate that in both markets the country risk premium has responded to some of the variables suggested by the theory. However, the way in which these variables affect the risk premium differs across these markets. Data on LDC bond yields in the secondary market for 1980-85 are also used to analyze the way in which this market reacted and anticipated the debt crisis.

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  • Sebastian Edwards, 1985. "The Pricing of Bonds and Bank Loans in International Markets: An Empirical Analysis of Developing Countries' Foreign Borrowing," NBER Working Papers 1689, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1689
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    1. Sebastian Edwards, 1983. "LDC's Foreign Borrowing and Default Risk: An Empirical Investigation," NBER Working Papers 1172, National Bureau of Economic Research, Inc.
    2. Harberger, Arnold C, 1980. "Vignettes on the World Capital Market," American Economic Review, American Economic Association, vol. 70(2), pages 331-337, May.
    3. Jacob A. Frenkel, 1983. "International Liquidity and Monetary Control," NBER Working Papers 1118, National Bureau of Economic Research, Inc.
    4. Eaton, Jonathan & Gersovitz, Mark, 1980. "LDC participation in international financial markets : Debt and reserves," Journal of Development Economics, Elsevier, vol. 7(1), pages 3-21, February.
    5. Frank, Charles Jr. & Cline, William R., 1971. "Measurement of debt servicing capacity: An application of discriminant analysis," Journal of International Economics, Elsevier, vol. 1(3), pages 327-344, August.
    6. Jeffrey Sachs & Daniel Cohen, 1982. "LDC Borrowing with Default Risk," NBER Working Papers 0925, National Bureau of Economic Research, Inc.
    7. Melvin, Michael & Schlagenhauf, Don, 1986. "Risk in international lending: A dynamic factor analysis applied to France and Mexico," Journal of International Money and Finance, Elsevier, vol. 5(1, Supple), pages 31-48, March.
    8. Feder, Gershon & Uy, Lily V., 1985. "The determinants of international creditworthiness and their policy implications," Journal of Policy Modeling, Elsevier, vol. 7(1), pages 133-156.
    9. Feder, Gershon & Ross, Knud Z, 1982. "Risk Assessments and Risk Premiums in the Eurodollar Market," Journal of Finance, American Finance Association, vol. 37(3), pages 679-691, June.
    10. Feder, Gershon & Just, Richard E., 1977. "A study of debt servicing capacity applying logit analysis," Journal of Development Economics, Elsevier, vol. 4(1), pages 25-38, February.
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