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Beyond Aid

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Author Info

  • Cheikh A. Gueye
  • Amadou N. R. Sy

Abstract

Post debt relief, the number of African countries considering accessing international capital markets, often to fund large infrastructure projects, is increasing. Potential risks of capital inflows are well known but the literature offers little help to estimate the cost of borrowing internationally for the first time. This paper proposes a two-step approach to estimate the sovereign credit rating and interest rate cost of a country considering borrowing externally. Estimates can be used to assess the costs and benefits of different financing options. The method can also be used to construct foreign currency as well as domestic local currency yield curves.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/140.

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Length: 21
Date of creation: 01 Jun 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/140

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Keywords: External borrowing; External financing; Capital inflows; International bond markets; Infrastructure; Low-income developing countries; capital markets; bond; international capital markets; market bond; international capital; bond spreads; bonds; bond yield; sovereign bond; emerging market bond; credit rating; international bonds; sovereign bonds; current account balance; cost of capital; emerging market bonds; risk aversion; corporate bonds; corporate bond; inflation rate; capital flows; forward markets; bond spread; financial stability; capital outflows; international bond; denominated bonds; high yield bond; global bond index; treasury bonds; global bond; international interest rates; stock index; credit rationing; bond index; international finance; capital markets borrowing; credit rating agencies; yields on bonds; bond issuers; credit constraint; current account deficit; outstanding bonds; currency of denomination; index option; mature markets; underdeveloped capital markets; stock index option; bond markets;

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References

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  1. Sy, Amadou N. R., 2002. "Emerging market bond spreads and sovereign credit ratings: reconciling market views with economic fundamentals," Emerging Markets Review, Elsevier, vol. 3(4), pages 380-408, December.
  2. 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.
  3. Peter Rowland & José Luis Torres Trespalacios, 2004. "Determinants Of Spread And Creditworthiness For Emerging Market Sovereign Debt: A Panel Data Study," BORRADORES DE ECONOMIA 002337, BANCO DE LA REPÚBLICA.
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Cited by:
  1. Bevan, David, 2012. "Aid, Fiscal Policy, Climate Change, and Growth," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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