IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The End of Gatekeeping: Underwriters and the Quality of Sovereign Bond Markets, 1815-2007

Author Info

  • Flandreau, Marc
  • Flores Zendejas, Juan Huitzilihuitl
  • Gaillard, Norbert
  • Nieto-Parra, Sebastián

Abstract

We provide a comparison of salient organizational features of primary markets for foreign government debt over the very long run. We focus on output, quality control, information provision, competition, pricing, charging and signaling. We find that the market set up experienced a radical transformation in the recent period and interpret this as resulting from the rise of liability insurance provided by rating agencies. Underwriters have given up their former role as gatekeepers of liquidity and certification agencies to become aggressive competitors in a new speculative grade market.

Download Info

If 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.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7347
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7347.

as
in new window

Length:
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:cpr:ceprdp:7347
Contact details of provider: Postal:
Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.

Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


Keywords: banks competition; certification; primary bond market; sovereign debt crises;

Other versions of this item:

Find related papers by JEL classification:
  • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
  • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
  • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
  • N2 - Economic History - - Financial Markets and Institutions

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:

as in new window
  1. Chemmanur, Thomas J & Fulghieri, Paolo, 1994. " Investment Bank Reputation, Information Production, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 49(1), pages 57-79, March.
  2. G. Ferri & L.-G. Liu & J. E. Stiglitz, 1999. "The Procyclical Role of Rating Agencies: Evidence from the East Asian Crisis," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 335-355, November.
  3. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
  4. Becker, Torbjorn & Richards, Anthony & Thaicharoen, Yunyong, 2003. "Bond restructuring and moral hazard: are collective action clauses costly?," Journal of International Economics, Elsevier, vol. 61(1), pages 127-161, October.
  5. Enrica Detragiache & Asli Demirgüç-Kunt, 1999. "Monitoring Banking Sector Fragility; A Multivariate Logit Approach," IMF Working Papers 99/147, International Monetary Fund.
  6. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-72, May.
  7. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany.
  8. Graciela L. Kaminsky & Carmen Reinhart & Carlos A. Vegh, 2003. "The Unholy Trinity of Financial Contagion," NBER Working Papers 10061, National Bureau of Economic Research, Inc.
  9. Fernando Broner & Guido Lorenzoni & Sergio L. Schmukler, . "Why Do Emerging Economies Borrow Short Term?," Working Papers 308, Barcelona Graduate School of Economics.
  10. Peter H. Lindert & Peter J. Morton, 1989. "How Sovereign Debt Has Worked," NBER Chapters, in: Developing Country Debt and the World Economy, pages 225-236 National Bureau of Economic Research, Inc.
    • Peter H. Lindert & Peter J. Morton, 1989. "How Sovereign Debt Has Worked," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 39-106 National Bureau of Economic Research, Inc.
  11. Enrica Detragiache & Asli Demirgüç-Kunt, 1998. "Financial Liberalization and Financial Fragility," IMF Working Papers 98/83, International Monetary Fund.
  12. Barry Eichengreen & Ashoka Mody, 2001. "Would Collective Action Clauses Raise Borrowing Costs? An Update and Additional Results," International Finance 0012003, EconWPA.
  13. Frédéric Zumer & Jacques Le Cacheux & Marc Flandreau, 1998. "Stability without a pact? Lessons from the European Gold Standard, 1880-1913," Sciences Po publications n°98-01, Sciences Po.
  14. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  15. Barry Eichengreen & Ashoka Mody, 2000. "Would Collective Action Clauses Raise Borrowing Costs?," NBER Working Papers 7458, National Bureau of Economic Research, Inc.
  16. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
  17. Catherine A Pattillo & Andrew Berg, 1998. "Are Currency Crises Predictable? A Test," IMF Working Papers 98/154, International Monetary Fund.
  18. Eichengreen, Barry & Portes, Richard, 1985. "Debt and Default in the 1930s: Causes and Consequences," CEPR Discussion Papers 75, C.E.P.R. Discussion Papers.
  19. Eichengreen, Barry & Portes, Richard, 1989. "Dealing with Debt: The 1930s and the 1980s," CEPR Discussion Papers 300, C.E.P.R. Discussion Papers.
  20. Graciela Laura Kaminsky, 1999. "Currency and Banking Crises; The Early Warnings of Distress," IMF Working Papers 99/178, International Monetary Fund.
  21. Ana Fostel & Graciela Laura Kaminsky, 2008. "Latin America´s Access to International Capital Markets: Good Behavior or Global Liquidity?," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmidt- (ed.), Current Account and External Financing, edition 1, volume 12, chapter 4, pages 117-158 Central Bank of Chile.
  22. Hugh Rockoff & Michael D. Bordo, 1996. "The Gold Standard as a "Good Housekeeping Seal of Approval"," Departmental Working Papers 199528, Rutgers University, Department of Economics.
  23. Mauro, Paolo & Sussman, Nathan & Yafeh, Yishay, 2007. "Emerging Markets and Financial Globalization: Sovereign Bond Spreads in 1870-1913 and Today," OUP Catalogue, Oxford University Press, number 9780199226139, December.
  24. Sebastián Nieto-Parra, 2009. "Who Saw Sovereign Debt Crises Coming?," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Fall 2009), pages 125-169, August.
  25. Michael Bordo & Michael Edelstein, 1999. "Was Adherence to the Gold Standard a "Good Housekeeping Seal of Approval" During the Interwar Period?," NBER Working Papers 7186, National Bureau of Economic Research, Inc.
  26. Rodrigo O. Valdes & Ilan Goldfajn, 1997. "Are Currency Crises Predictable?," IMF Working Papers 97/159, International Monetary Fund.
  27. Flandreau, Marc & Gaillard, Norbert & Packer, Frank, 2009. "Ratings Performance, Regulation and the Great Depression: Lessons from Foreign Government Securities," CEPR Discussion Papers 7328, C.E.P.R. Discussion Papers.
  28. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "Serial Default and the "Paradox" of Rich to Poor Capital Flows," NBER Working Papers 10296, National Bureau of Economic Research, Inc.
  29. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
  30. Sturzenegger, Federico & Zettelmeyer, Jeromin, 2008. "Haircuts: Estimating investor losses in sovereign debt restructurings, 1998-2005," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 780-805, September.
  31. Beatty, Randolph P. & Ritter, Jay R., 1986. "Investment banking, reputation, and the underpricing of initial public offerings," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 213-232.
  32. Bordo, Michael D. & Murshid, Antu Panini, 2006. "Globalization and changing patterns in the international transmission of shocks in financial markets," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 655-674, June.
  33. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  34. Paolo Mauro & Yishay Yafeh & Nathan Sussman, 2001. "Emerging Market Spreads: Then Versus Now," OFRC Working Papers Series 2001fe03, Oxford Financial Research Centre.
  35. Michael D. Bordo & Antu P. Murshid, 2000. "Are Financial Crises Becoming Increasingly More Contagious? What is the Historical Evidence on Contagion?," NBER Working Papers 7900, National Bureau of Economic Research, Inc.
  36. Arturo C. Porzecanski, 2005. "From Rogue Creditors to Rogue Debtors: Implications of Argentina's Default," International Finance 0510010, EconWPA.
  37. Reisen, Helmut & von Maltzan, Julia, 1999. "Boom and Bust and Sovereign Ratings," International Finance, Wiley Blackwell, vol. 2(2), pages 273-93, July.
  38. Reinhart, Carmen & Kaminsky, Graciela & Goldstein, Morris, 2000. "Notes on contagion," MPRA Paper 24569, University Library of Munich, Germany.
  39. Mark Gugiatti & Anthony Richards, 2003. "Do Collective Action Clauses Influence Bond Yields? New Evidence from Emerging Markets," RBA Research Discussion Papers rdp2003-02, Reserve Bank of Australia.
  40. Marc Flandreau & Jacques Le Cacheux & Frédéric Zumer, 1998. "Stability without a pact? Lessons from the European gold standard, 1880-1914," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 115-162, 04.
  41. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-62, August.
  42. David A. Grigorian, 2003. "On the Determinants of First-Time Sovereign Bond Issues," IMF Working Papers 03/184, International Monetary Fund.
  43. Ilse Mintz, 1951. "Introduction to "Deterioration in the Quality of Foreign Bonds Issued in the United States, 1920-1930"," NBER Chapters, in: Deterioration in the Quality of Foreign Bonds Issued in the United States, 1920-1930, pages 1-7 National Bureau of Economic Research, Inc.
  44. Flandreau, Marc & Flores, Juan H., 2009. "Bonds and Brands: Foundations of Sovereign Debt Markets, 1820–1830," The Journal of Economic History, Cambridge University Press, vol. 69(03), pages 646-684, September.
  45. Richard B. Carter & Frederick H. Dark & Ajai K. Singh, 1998. "Underwriter Reputation, Initial Returns, and the Long-Run Performance of IPO Stocks," Journal of Finance, American Finance Association, vol. 53(1), pages 285-311, 02.
  46. R. G Gelos & Guido M Sandleris & Ratna Sahay, 2004. "Sovereign Borrowing by Developing Countries; What Determines Market Access?," IMF Working Papers 04/221, International Monetary Fund.
  47. Larry Neal & Marc D. Weidenmier, 2001. "Crises in The Global Economy from Tulips to Today: Contagion and Consequences," Claremont Colleges Working Papers 2001-32, Claremont Colleges.
  48. Flores, Juan-Huitzi, 2007. "Lending booms, underwriting and competition : the baring crisis revisited," IFCS - Working Papers in Economic History.WH wp07-01, Universidad Carlos III de Madrid. Instituto Figuerola.
  49. Reinhart, Carmen M. & Rogoff, Kenneth S., 2004. "Serial Default and the “Paradox†of Rich-to-Poor Capital Flows," Scholarly Articles 11129182, Harvard University Department of Economics.
  50. Ilse Mintz, 1951. "Deterioration in the Quality of Foreign Bonds Issued in the United States, 1920-1930," NBER Books, National Bureau of Economic Research, Inc, number mint51-1, Jan-Jun.
  51. Klovland, Jan Tore, 1994. "Pitfalls in the Estimation of the Yield on British Consols, 1850–1914," The Journal of Economic History, Cambridge University Press, vol. 54(01), pages 164-187, March.
  52. repec:spo:wpecon:info:hdl:2441/645 is not listed on IDEAS
  53. Larry D. Neal & Marc D. Weidenmier, 2003. "Crises in the Global Economy from Tulips to Today," NBER Chapters, in: Globalization in Historical Perspective, pages 473-514 National Bureau of Economic Research, Inc.
  54. Accominotti, Olivier & Flandreau, Marc & Rezzik, Riad & Zumer, Frédéric, 2008. "Black Man’s Burden: Measured Philanthropy in the British Empire, 1880-1913," CEPR Discussion Papers 6811, C.E.P.R. Discussion Papers.
  55. Flandreau, Marc & Sussman, Nathan, 2004. "Old Sins: Exchange Rate Clauses and European Foreign Lending in the 19th Century," CEPR Discussion Papers 4248, C.E.P.R. Discussion Papers.
  56. Khaled Amira, 2004. "Determinants of Sovereign Eurobonds Yield Spread," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(5-6), pages 795-821.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as in new window


Cited by:

  1. Kim Oosterlinck & Loredana Ureche-Rangau & Jacques-Marie Vaslin, 2013. "Waterloo: a Godsend for French Public Finances?," Working Papers CEB 13-028, ULB -- Universite Libre de Bruxelles.
  2. Reinhart, Carmen M., 2012. "A Series of Unfortunate Events: Common Sequencing Patterns in Financial Crises," CEPR Discussion Papers 8742, C.E.P.R. Discussion Papers.
  3. Chavaz, Matthieu & Flandreau, Marc, 2015. "‘High and dry’: the liquidity and credit of colonial and foreign government debt in the London Stock Exchange (1880–1910)," Bank of England working papers 555, Bank of England.
  4. Rohan Pitchford & Mark L. J. Wright, 2013. "On the contribution of game theory to the study of sovereign debt and default," Oxford Review of Economic Policy, Oxford University Press, vol. 29(4), pages 649-667, WINTER.
  5. Vincent Bignon & Marc Flandreau, 2010. "The Economics of Badmouthing: Libel Law and the Underworld of the Financial Press in France before World War I," EconomiX Working Papers 2010-18, University of Paris West - Nanterre la Défense, EconomiX.
  6. Satyajit Chatterjee & Burcu Eyigungor, 2015. "A Seniority Arrangement for Sovereign Debt," American Economic Review, American Economic Association, vol. 105(12), pages 3740-65, December.
  7. Flandreau, Marc & Gaillard, Norbert & Panizza, Ugo, 2010. "Conflicts of Interest, Reputation, and the Interwar Debt Crisis: Banksters or Bad Luck?," CEPR Discussion Papers 7705, C.E.P.R. Discussion Papers.
  8. Flores Zendejas, Juan, 2015. "Capital Markets and Sovereign Defaults: A Historical Perspective," Working Papers unige:73325, University of Geneva, Paul Bairoch Institute of Economic History.
  9. Carola Frydman & Eric Hilt, 2014. "Investment Banks as Corporate Monitors in the Early 20th Century United States," NBER Working Papers 20544, National Bureau of Economic Research, Inc.
  10. Marc Flandreau & Juan Flores, 2011. "Bondholders vs. bond-sellers? Investment banks and conditionality lending in the London market for foreign government debt, 1815-1913," Working Papers 0002, European Historical Economics Society (EHES).
  11. Flandreau, Marc & Flores Zendejas, Juan Huitzilihuitl, 2010. "Hamlet without the Prince of Denmark: Relationship banking and conditionality lending in the London market for government debt, 1815-1913," CEPR Discussion Papers 7915, C.E.P.R. Discussion Papers.
  12. Kim Oosterlinck, 2013. "Sovereign debt defaults: insights from history," Oxford Review of Economic Policy, Oxford University Press, vol. 29(4), pages 697-714, WINTER.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:7347. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.