Uncertainty and the Disappearance of International Credit
AbstractWe show that increased uncertainty about the size of an emerging market's external debt has a nonlinear and potentially large adverse effect on the supply of international credit offered to them. We also show that if international creditors are first- order risk averse, attaching greater weight to utility derived from bad outcomes than from good ones, a moderate increase in uncertainty about debt overhang or about other relevant factors affecting repayment prospects-- can cause the supply of credit to dry up completely. We therefore offer one possible explanation for why emerging markets may find themselves suddenly cut off from international capital markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7389.
Date of creation: Oct 1999
Date of revision:
Publication status: published as Proceedings, Federal Reserve Bank of San Francisco, 1999 Pacific Basin Conference, September 23-24, 1999
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Joshua Aizenman & Nancy Marion, 1999. "Uncertainty and the disappearance of international credit," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
- F2 - International Economics - - International Factor Movements and International Business
- F3 - International Economics - - International Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-11-08 (All new papers)
- NEP-IND-1999-11-08 (Industrial Organization)
- NEP-MON-1999-11-08 (Monetary Economics)
- NEP-PKE-1999-11-15 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fukuda, Shin-ichi & Hoshi, Takeo & Ito, Takatoshi & Rose, Andrew, 2006. "International Finance," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 455-458, December.
- Alwyn Young, 1992. "A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 13-64 National Bureau of Economic Research, Inc.
- David C. King & Richard J. Zeckhauser, 1999. "Congressional Vote Options," NBER Working Papers 7342, National Bureau of Economic Research, Inc.
- Michael D. Hurd & James P. Smith, 2001.
"Anticipated and Actual Bequests,"
in: Themes in the Economics of Aging, pages 357-392
National Bureau of Economic Research, Inc.
- Townsend, Robert M., 1979.
"Optimal contracts and competitive markets with costly state verification,"
Journal of Economic Theory,
Elsevier, vol. 21(2), pages 265-293, October.
- Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
- Ricardo Caballero & Arvind Krishnamurthy, 1999.
"Emerging Market Crises: An Asset Markets Perspective,"
99-23, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ricardo J. Caballero & Arvind Krishnamurthy, 1998. "Emerging Market Crises: An Asset Markets Perspective," NBER Working Papers 6843, National Bureau of Economic Research, Inc.
- Ricardo Caballero & Arvind Krishnamurthy, 1998. "Emerging Market Crises: An Asset Markets Perspective," Working papers 98-18, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jeremy I. Bulow & Kenneth Rogoff, 1987.
"A Constant Recontracting Model of Sovereign Debt,"
NBER Working Papers
2088, National Bureau of Economic Research, Inc.
- Jeremy A.Rogoff Bulow & Kenneth, 1986. "A Constant Recontracting Model of Sovereign Debt," University of Chicago - George G. Stigler Center for Study of Economy and State 43, Chicago - Center for Study of Economy and State.
- Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
- Aizenman, Joshua, 1989. "Country Risk, Incomplete Information and Taxes on International Borrowing," Economic Journal, Royal Economic Society, vol. 99(394), pages 147-61, March.
- Roberto Chang & Andres Velasco, 1998. "Financial crises in emerging markets: a canonical model," Working Paper 98-10, Federal Reserve Bank of Atlanta.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
- Uzi Segal & Avia Spivak, 1988.
"First Order Versus Second Order Risk Aversion,"
UCLA Economics Working Papers
540, UCLA Department of Economics.
- Lewis, Karen K., 1995. "Puzzles in international financial markets," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 37, pages 1913-1971 Elsevier.
- Robert E. Lipsey, 1999. "Foreign Production by U.S. Firms and Parent Firm Employment," NBER Working Papers 7357, National Bureau of Economic Research, Inc.
- Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
- Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August.
- Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
- Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
- Maurice Obstfeld, 1988. "International Finance," NBER Working Papers 2077, National Bureau of Economic Research, Inc.
- Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-79, May.
- Boyd, John H & Smith, Bruce D, 1994. "How Good Are Standard Debt Contracts? Stochastic versus Nonstochastic Monitoring in a Costly State Verification Environment," The Journal of Business, University of Chicago Press, vol. 67(4), pages 539-61, October.
- Marion, Nancy P., 2000. "Optimal currency crises A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 53(1), pages 231-238, December.
- Joshua Aizenman, 1999. "Capital Controls and Financial Crises," NBER Working Papers 7398, National Bureau of Economic Research, Inc.
- Theo S Eicher & Uwe Walz & Stephen Turnovsky, 2000.
"Financial Liberalization and Capital Flow Reversals:,"
Discussion Papers in Economics at the University of Washington
0003, Department of Economics at the University of Washington.
- Theo S Eicher & Uwe Walz & Stephen Turnovsky, 2000. "Financial Liberalization and Capital Flow Reversals:," Working Papers 0003, University of Washington, Department of Economics.
- Agenor, Pierre-Richard & Aizenman, Joshua, 2002.
"Financial sector inefficiencies and the debt Laffer curve,"
Policy Research Working Paper Series
2842, The World Bank.
- Pierre-Richard Agénor & Joshua Aizenman, 2005. "Financial sector inefficiencies and the debt Laffer curve," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 1-13.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.