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Do the secondary markets believe in life after debt?

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  • Hajivassiliou,Vassilis A.

Abstract

Using panel data econometric techniques to examine the case for external debt relief, this report explores the relations between measures of creditworthiness and debt discounts on the secondary markets. It finds, however, that secondary market values tend to reflect past difficulties, not anticipate future ones - so they can't be used to build a case for debt relief. The secondary markets, still in an early evolutionary stage, are quite"thin"and thus unable to exploit efficiently and quickly all available information on creditworthiness.

Suggested Citation

  • Hajivassiliou,Vassilis A., 1989. "Do the secondary markets believe in life after debt?," Policy Research Working Paper Series 252, The World Bank.
  • Handle: RePEc:wbk:wbrwps:252
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    Cited by:

    1. Ozler, Sule*Huizinga, Harry, 1991. "How factors in creditor countries affect secondary market prices for developing country debt," Policy Research Working Paper Series 622, The World Bank.
    2. Hajivassiliou, V A, 1994. "A Simulation Estimation Analysis of the External Debt Crises of Developing Countries," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(2), pages 109-131, April-Jun.
    3. Lisa M. Schineller, 1997. "A nonlinear econometric analysis of capital flight," International Finance Discussion Papers 594, Board of Governors of the Federal Reserve System (U.S.).
    4. Edda Zoli, 2004. "Credit Rationing in Emerging Economies' Access to Global Capital Markets," IMF Working Papers 04/70, International Monetary Fund.
    5. Fernandez, Raquel & Ozler, Sule, 1991. "Debt concentration and secondary market prices," Policy Research Working Paper Series 570, The World Bank.
    6. Kalotychou, Elena & Staikouras, Sotiris K., 2006. "An empirical investigation of the loan concentration risk in Latin America," Journal of Multinational Financial Management, Elsevier, vol. 16(4), pages 363-384, October.
    7. Lisa M. Schineller, 1997. "An econometric model of capital flight from developing countries," International Finance Discussion Papers 579, Board of Governors of the Federal Reserve System (U.S.).
    8. Mamoru Kaneko & Jacek Prokop, 1993. "A game theoretical approach to the international debt overhang," Journal of Economics, Springer, vol. 58(1), pages 1-24, February.
    9. Peter Rowland, 2004. "The Colombian Sovereign Spread And Its Determinants," BORRADORES DE ECONOMIA 003572, BANCO DE LA REPÚBLICA.
    10. Cumby, Robert E. & Pastine, Tuvana, 2001. "Emerging market debt: measuring credit quality and examining relative pricing," Journal of International Money and Finance, Elsevier, vol. 20(5), pages 591-609, October.
    11. Peter Rowland, 2005. "Buyback of Colombian Sovereign Debt," Borradores de Economia 331, Banco de la Republica de Colombia.
    12. Lestano & Jacobs, Jan & Kuper, Gerard H., 2003. "Indicators of financial crises do work! : an early-warning system for six Asian countries," CCSO Working Papers 200313, University of Groningen, CCSO Centre for Economic Research.
    13. Sawada, Yasuyuki, 2001. "Secondary market efficiency for LDC bank loans and international private lending, 1985-1993," Journal of International Money and Finance, Elsevier, vol. 20(4), pages 549-562, August.
    14. Sule Ozler & Harry Huizinga, 1992. "Bank Exposure, Capital and Secondary Market Discounts on the Developing Country Debt," NBER Working Papers 3961, National Bureau of Economic Research, Inc.
    15. Barbone, Luca & Forni, Lorenzo, 1997. "Are markets learning? : behavior in the secondary market for Brady bonds," Policy Research Working Paper Series 1734, The World Bank.
    16. Chikako Oka, 2003. "Anticipating Arrears to the IMF Early Warning Systems," IMF Working Papers 03/18, International Monetary Fund.
    17. David McKenzie, 2001. "An Econometric analysis of IBRD creditworthiness," International Economic Journal, Taylor & Francis Journals, vol. 18(4), pages 427-448.
    18. Zeaiter, Hussein & El-Khalil, Raed, 2016. "Extreme bounds of sovereign defaults: Evidence from the MENA region," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 391-410.
    19. Raquel Fernandez & Sule Ozler, 1991. "Debt Concentration and Secondary Markets Prices: A Theoretical and Empirical Analysis," NBER Working Papers 3654, National Bureau of Economic Research, Inc.
    20. Chakrabarti, Avik & Zeaiter, Hussein, 2014. "The determinants of sovereign default: A sensitivity analysis," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 300-318.
    21. Clark, Ephraim & Kassimatis, Konstantinos, 2004. "Country financial risk and stock market performance: the case of Latin America," Journal of Economics and Business, Elsevier, vol. 56(1), pages 21-41.
    22. Lee, Suk Hun & Sung, Hyun Mo & Urrutia, Jorge L., 1996. "The behavior of secondary market prices of LDC syndicated loans," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 537-554, April.
    23. 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.
    24. A. Georgievska & L. Georgievska & A. Stojanovic & N. Todorovic, 2008. "Sovereign rescheduling probabilities in emerging markets: a comparison with credit rating agencies' ratings," Journal of Applied Statistics, Taylor & Francis Journals, vol. 35(9), pages 1031-1051.
    25. Peter Rowland, 2005. "Buyback Of Colombian Sovereign Debt," BORRADORES DE ECONOMIA 002073, BANCO DE LA REPÚBLICA.

    More about this item

    Keywords

    Strategic Debt Management; Financial Intermediation; Environmental Economics&Policies; Economic Theory&Research; Banks&Banking Reform;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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