We analyze the pattern of growth of a nation which borrows abroad and which has the option of repudiating its foreign debt. We show that the equilibrium strategy of competitive lenders is to make the growth of the foreign debt contingent on the growth of the borrowing country. We give a...

In this paper, we explore the link between stress in the domestic financial sector and the capital flight faced by countries in the 2008-9 global crisis. Both the timing of emergence of internal financial stress in developing economies, and the size of the peak-trough declines in the stock price...

This paper raises several cautionary notes regarding high-conditionality lending by the International Monetary Fund and the World Bank in the context of international debt crisis. It is argued that the role for high-conditionality lending is more restricted than generally believed, because...

This paper develops a cross-country statistical model of debt rescheduling, and the secondary market valuation of LDC debt, which links these variables to key structural characteristics of developing countries, such as the trade regime, the degree of income inequality, and the share of...

The effect on commercial banks of exposure to large amounts of developing country debt has been a topic of increasing concern in recent years. Fear of default on the part of the debtor countries has led to fears for the solvency of the creditor banks since in many cases the total of outstanding...

With the rapid increase in LDC indebtedness in the recent decade, the issues of creditworthiness and country risk have gained new importance. This paper offers a theoretical and historical analysis of international capital markets in the presence of default risk. The theoretical model suggests...

We show that increased uncertainty about the size of an emerging market's external debt has a nonlinear and potentially large adverse effect on the supply of international credit offered to them. We also show that if international creditors are first- order risk averse, attaching greater weight...

This paper analyzes the factors determining the effective payment on outstanding debt in the presence of partial defaults, and the feasibility of renewed investment. We show that the bargaining outcome, which determines the repayment, is dictated by the trade dependency, as measured by the...

The purpose of this paper is to study the role of credit market policies in the presence of country risk from the nationalistic and the global point of view, to address the role of endogenous default penalties that are contingent upon the intensity of default on the part of the borrowing nation,...

This paper describes an economy where incomplete information regarding the default penalty can result in an upward-sloping supply of credit.We evaluate the role of partial information and other related factors in determining the elasticity of supply of credit and the credit ceiling facing the...