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Bonds or Loans? The Effect of Macroeconomic Fundamentals

  • Galina Hale

The costs of debt crises are not invariant to the foreign debt instrument composition: bank loans or bonds. The lending boom of the 1990s witnessed considerable variation over time and across countries in the debt instrument used by emerging market (EM) borrowers. This paper tests how macroeconomic fundamentals affect the composition of international debt instruments used by EM borrowers. Analysis of micro-level data using ordered probability model shows that macroeconomic fundamentals explain a significant share of variation in the ratio of bonds to loans for private borrowers, but not for the sovereigns.

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File URL: http://icfpub.som.yale.edu/publications/2650
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Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm343.

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Date of creation: 01 Apr 2003
Date of revision: 01 Apr 2007
Handle: RePEc:ysm:somwrk:ysm343
Contact details of provider: Web page: http://icf.som.yale.edu/

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  1. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
  2. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-400, September.
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  5. Broner, Fernando A & Lorenzoni, Guido & Schmukler, Sergio, 2007. "Why Do Emerging Economies Borrow Short Term?," CEPR Discussion Papers 6249, C.E.P.R. Discussion Papers.
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  9. Barry Eichengreen & Kenneth Kletzer & Ashoka Mody, 2005. "The IMF in a World of Private Capital Markets," NBER Working Papers 11198, National Bureau of Economic Research, Inc.
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  11. Edwards, Sebastian, 1986. "The pricing of bonds and bank loans in international markets : An empirical analysis of developing countries' foreign borrowing," European Economic Review, Elsevier, vol. 30(3), pages 565-589, June.
  12. Jeanne, Olivier, 2000. "Debt Maturity and the Global Financial Architecture," CEPR Discussion Papers 2520, C.E.P.R. Discussion Papers.
  13. Ruud, Paul A., 2000. "An Introduction to Classical Econometric Theory," OUP Catalogue, Oxford University Press, number 9780195111644, March.
  14. Eichengreen, Barry & Mody, Ashoka, 1998. "Interest Rates in the North and Capital Flows to the South: Is There a Missing Link?," International Finance, Wiley Blackwell, vol. 1(1), pages 35-57, October.
  15. repec:bge:wpaper:185 is not listed on IDEAS
  16. Michael P. Dooley, 2000. "Can Output Losses Following International Financial Crises be Avoided?," NBER Working Papers 7531, National Bureau of Economic Research, Inc.
  17. Mody, Ashoka & Taylor, Mark P & Kim, Jung Yeon, 2001. "Modelling Fundamentals for Forecasting Capital Flows to Emerging Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 201-16, July.
  18. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  19. Demirguc-Kunt, Ash & Maksimovic, Vojislav, 1996. "Stock Market Development and Financing Choices of Firms," World Bank Economic Review, World Bank Group, vol. 10(2), pages 341-69, May.
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