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How Private Creditors Fared in Emerging Debt Markets, 1970-2000

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Author Info

  • Jeromin Zettelmeyer
  • Beatrice Weder
  • Christoph Klingen

Abstract

We estimate ex post returns to emerging market debt by combining secondary-market prices with observed flows based on World Bank data. From 1970-2000, returns averaged 9 percent per annum, about the same as returns on a ten-year U.S. treasury bond. This reflects the combined effect of the 1980s debt crisis and much higher returns during 1989-2000. Annual returns since 1986 have been less volatile than emerging market equity returns but more volatile than returns on U.S. corporate or high-yield bonds. However, unlike returns on these bonds, emerging market debt returns do not seem significantly correlated with U.S. or world stock markets.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/13.

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Length: 60
Date of creation: 01 Jan 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/13

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Keywords: Sovereign debt; Capital flows; Emerging markets; debt; bonds; bond; creditors; debt stock; long term debt; short term debt; interest; bond prices; loans; debt flows; payments; debt stocks; corporate bonds; external debt; stock returns; brady bond; brady bonds; debt restructuring; high-yield bonds; currency valuation; treasury bonds; debt consolidation; repayment; restructuring; government bond; creditor; bond returns; stock markets; debtor countries; equity markets; debtors; stock market; stock-flow reconciliation; cross-currency valuation; debt service; defaults; government bonds; ppg debt; debt instruments; world stock markets; bond issues; debt outstanding; corporate bond; debtor reporting; bank loans; bond yields; debt stock outstanding; bailouts; discount ? bonds; bond market; high-yield bond; international bonds; interest rate risk; risk premium; dollar bonds; long term debt stock; outstanding debt; treasury bond; corporate bond returns; currency valuation adjustments; world debt tables; bond rates; bond index; moral hazard; debt buy back; default risk; emerging stock markets; stock of debt; stock adjustments; public debt; world stock market; equity market; market bond; bond markets; discount bonds; bond indices; cash flows; emerging market bond; bond price; debt crises; debt stock-flow reconciliation; debt forgiveness; liabilities; international debt; coupon bonds; zero coupon bonds; emerging market bonds; eurobonds; par bonds; debt problems; debt stock reduction; financial economics; asset markets; yield curve; market discount; bond issue; outstanding debt stocks; debt stock reductions; global ? bond; stock-flow discrepancies; debt conversion; bond stock; international capital markets; coupon bond; international bond; interest capitalization; secondary markets; global bond indices; currency of denomination; commercial bank debt; domestic government bonds; bond categories; c-bonds; debts; internal rate of return; bond holders; international capital; emerging bond markets; international bond issues; high-yield corporate bonds; corporate bond index; international finance; financial assets; financial market; emerging bond market; bond disbursements; government bond yields; global ? bond index; guaranteed bonds; outstanding debt stock; returns on bonds; private nonguaranteed debt; high yield bonds; private debt; bond return; par ? bonds; sterling bonds; debt reduction; debt end-stock; stock-flow identity; stock market decline; global bond; international financial architecture; bond price aggregation; emerging markets stock; debt swaps; equity] market;

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References

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  1. Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 19-50, January.
  2. Rogoff, Kenneth, 1990. "Symposium on New Institutions for Developing Country Debt," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 3-6, Winter.
  3. K. Rouwenhorst, 1998. "Local Return Factors and Turnover in Emerging Stock Markets," Yale School of Management Working Papers ysm97, Yale School of Management, revised 01 Mar 2001.
  4. G. Andrew Karolyi & Rene M. Stulz, 2002. "Are Financial Assets Priced Locally or Globally?," NBER Working Papers 8994, National Bureau of Economic Research, Inc.
  5. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
  6. William Goetzmann & Philippe Jorion, 1998. "Re-emerging Markets," Yale School of Management Working Papers ysm50, Yale School of Management, revised 01 Aug 2000.
  7. Michael Dooley & Richard D. Haas & Steven Symansky, 1993. "A Note on Burden Sharing among Creditors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 226-232, March.
  8. Edwin J. Elton, 2001. "Explaining the Rate Spread on Corporate Bonds," Journal of Finance, American Finance Association, vol. 56(1), pages 247-277, 02.
  9. Giovanni Dell'Ariccia & Jeromin Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund.
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Citations

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Cited by:
  1. Lizarazo, Sandra Valentina, 2013. "Default risk and risk averse international investors," Journal of International Economics, Elsevier, vol. 89(2), pages 317-330.
  2. Fernando Broner & Guido Lorenzoni & Sergio L. Schmukler, 2011. "Why Do Emerging Economies Borrow Short Term?," Working Papers 308, Barcelona Graduate School of Economics.
  3. Michael Tomz & Mark L. J. Wright, 2012. "Empirical research on sovereign debt and default," Working Paper Series WP-2012-06, Federal Reserve Bank of Chicago.
  4. Juan J. Cruces & Christoph Trebesch, 2011. "Sovereign Defaults: The Price of Haircuts," CESifo Working Paper Series 3604, CESifo Group Munich.
  5. Ricardo Hausmann and Federico Sturzenegger, 2006. "Global imbalances or bad accounting? The missing dark matter in the wealth of nations," Business School Working Papers globalimbal, Universidad Torcuato Di Tella.
  6. Adam, Klaus & Grill, Michael, 2013. "Optimal sovereign default," Discussion Papers 09/2013, Deutsche Bundesbank, Research Centre.
  7. Ashoka Mody, 2004. "What is An Emerging Market?," IMF Working Papers 04/177, International Monetary Fund.
  8. Jeanne, Olivier & Rancière, Romain, 2008. "The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications," CEPR Discussion Papers 6723, C.E.P.R. Discussion Papers.
  9. James M. Boughton, 2005. "Does the World Need a Universal Financial Institution?," IMF Working Papers 05/116, International Monetary Fund.

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