This paper explores the effects of official creditor subsidies to private lenders on loan pricing and credit availability. A two-period model is developed which includes a private lender, a sovereign borrower and an official creditor. The presence of credible sovereign collateral is shown to be critical to the behavior of the official creditor, even though the collateral need never be seized. The probability of sovereign default is derived in a formal way. The "kiss of death" occurs when official creditor participation does not reduce the probability of default by enough to outweigh the increase in the expected loss to the private lender if default occurs. The result becomes stronger the riskier the sovereign borrower. The model suggests a different, more supervisory role for official creditors, particularly the IMF
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number
dp99-2.
Length: 15 pages Date of creation: 1999 Date of revision: Handle: RePEc:sfu:sfudps:dp99-2
Contact details of provider: Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada Phone: (778)782-3508 Fax: (778)782-5944 Web page: http://www.econ.sfu.ca/ More information through EDIRC
Find related papers by JEL classification: F30 - International Economics - - International Finance - - - General F34 - International Economics - - International Finance - - - International Lending and Debt Problems