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Commercial Banks And Ldc Debt Reduction

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  • GARY M. WOLLER
  • KERK PHILLIPS

Abstract

This paper investigates the relationship between the probability of default of lesser developed country commercial bank debt and the level of debt reduction granted by commercial banks. The analysis tests this relationship by regressing debt reduction totals for 29 middle-income debtors on 11 default probability indicators over the years 1985 through 1993 and finds a statistically significant relationship between the expected probability of default and the level of debt reduction. However, the findings fail to determine clearly the overall direction of this relationship. Thus, the evidence is insufficient to support the conclusion that the banks have behaved systematically as if they believed a debt-relief Laffer curve existed. Copyright 1996 Western Economic Association International.

Suggested Citation

  • Gary M. Woller & Kerk Phillips, 1996. "Commercial Banks And Ldc Debt Reduction," Contemporary Economic Policy, Western Economic Association International, vol. 14(2), pages 107-123, April.
  • Handle: RePEc:bla:coecpo:v:14:y:1996:i:2:p:107-123
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1465-7287.1996.tb00617.x
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    References listed on IDEAS

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    1. Tom H. Tietenberg, 1989. "Indivisible Toxic Torts: The Economics of Joint and Several Liability," Land Economics, University of Wisconsin Press, vol. 65(4), pages 305-319.
    2. Bruce Yandle, 1989. "Taxation, Political Action, and Superfund," Cato Journal, Cato Journal, Cato Institute, vol. 8(3), pages 751-764, Winter.
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    Cited by:

    1. Menbere Workie Tiruneh, 2005. "Why heavily indebted poor countries have failed to pay back their debt? An empirical investigation (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 55(3-4), pages 124-140, March.

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