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LDC Borrowing with Default Risk

Sachs, Jeffrey D.; Cohen, Daniel

This paper presents a theoretical model to describe the effects of default risk on international lending to LDC sovereign borrowers. The threat of defaults in international lending is shown to give rise to many characteristics of the syndicated loan market: (1) quantity rationing of loans; (2) LDC policies designed to enhance creditworthiness; (3) prevalence of short maturities on international loans; and (4) a prevalence of bank lending relative to bond-market lending.

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More About This Work

Academic Units
Earth Institute
Publisher
National Bureau of Economic Research
Series
NBER Working Paper, 925
Published Here
September 28, 2009

Notes

Published in Internationales Bankgeschäft, Kredit and Kapital special issue no. 8 (Berlin: Duncker & Humblot, 1985).

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