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Multilateral loans and interest rates: further evidence on the seniority conundrum

Listed author(s):
  • Sven Steinkamp

    ()

    (Osnabrueck University)

  • Frank Westermann

    ()

    (Osnabrueck University)

During Europe’s sovereign-debt crisis, interest rate spreads have been highly correlated with the share of multilateral loans that were considered senior to private markets. As both variables are potentially endogenous, we follow two different approaches to analyze the direction of causality. First, we use a set of IV regressions where the differences between sovereign ratings serve as instruments. Second, we analyze a new panel-survey dataset on seniority and interest rate expectations. In both approaches, we find evidence for the seniority conundrum – i.e., a positive impact of multilateral loans on interest rate spreads.

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File URL: http://web.fb9.uni-osnabrueck.de/repec/iee/wpaper/14804094_WP_105.pdf
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Paper provided by Institute of Empirical Economic Research, Osnabrueck University in its series Working Papers with number 105.

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Length: 16 pages
Date of creation: 29 Nov 2016
Date of revision: 30 Nov 2016
Handle: RePEc:iee:wpaper:wp0105
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