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Credit Rationing in Emerging Economies' Access to Global Capital Markets

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  • Ms. Edda Zoli

Abstract

This paper tests empirically the theoretical prediction that the country premium paid by emerging economies on sovereign debt increases with the amount of debt up to a certain critical level, above which the supply of foreign funds becomes fixed. The results confirm this theoretical prediction. The approach developed in the paper is also used to test for the presence of moral hazard in international lending. The results indicate significant changes in the supply of funds curve consistent with the presence of moral hazard in the period immediately following the Mexican rescue operation, but not after the Russian non-bailout.

Suggested Citation

  • Ms. Edda Zoli, 2004. "Credit Rationing in Emerging Economies' Access to Global Capital Markets," IMF Working Papers 2004/070, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/070
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    References listed on IDEAS

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    Cited by:

    1. Mykhaylova Olena & Staveley-O’Carroll James, 2014. "International transmission of productivity shocks with nonzero net foreign debt," The B.E. Journal of Macroeconomics, De Gruyter, vol. 14(1), pages 1-46, January.
    2. Mr. Manmohan S. Kumar & Jirí Jonáš & Mr. David Hauner, 2007. "Policy Credibility and Sovereign Credit: The Case of New EU Member States," IMF Working Papers 2007/001, International Monetary Fund.
    3. Heer, Burkhard & Schubert, Stefan Franz, 2012. "Unemployment and debt dynamics in a highly indebted small open economy," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1392-1413.
    4. Stefan Schubert & Stephen Turnovsky, 2011. "The Impact of Energy Prices on Growth and Welfare in a Developing Open Economy," Open Economies Review, Springer, vol. 22(3), pages 365-386, July.
    5. Mr. David Hauner & Mr. Manmohan S. Kumar, 2005. "Financial Globalization and Fiscal Perfomance in Emerging Markets," IMF Working Papers 2005/212, International Monetary Fund.
    6. Ms. Garima Vasishtha & Mr. Taimur Baig & Mr. Manmohan S. Kumar & Ms. Edda Zoli, 2006. "Fiscal and Monetary Nexus in Emerging Market Economies: How Does Debt Matter?," IMF Working Papers 2006/184, International Monetary Fund.
    7. Andreasen, Eugenia, 2015. "Sovereign default, enforcement and the private cost of capital," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 411-427.
    8. Ante Žigman & Boris Cota, 2011. "The impact of fiscal policy on government bond spreads in emerging markets," Financial Theory and Practice, Institute of Public Finance, vol. 35(4), pages 385-412.
    9. Olivier Jeanne & Jeromin Zettelmeyer, 2005. "The Mussa Theorem (and Other Results on IMF-Induced Moral Hazard)," IMF Staff Papers, Palgrave Macmillan, vol. 52(si), pages 1-5.
    10. Fakhraddin Maroofi & Parviz Kafchehi, 2012. "The Influence of Oil Prices on an Oil-Importing Developing Economy," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(4), pages 66-82, October.
    11. Schubert, Stefan F. & Turnovsky, Stephen J., 2011. "The impact of oil prices on an oil-importing developing economy," Journal of Development Economics, Elsevier, vol. 94(1), pages 18-29, January.

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