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Bonds or Loans? The Effect of Macroeconomic Fundamentals

Galina Hale
Federal Reserve Bank of San Francisco

September 2005

Yale ICF Working Paper No. 03-02; Cowles Foundation Discussion Paper No. 1403

Abstract:
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.

Keywords: Emerging Markets, Foreign Debt, Debt Composition, Country Risk

JEL Classifications: F34

Working Paper Series

Date posted: April 15, 2003 ; Last revised: April 19, 2007

Suggested Citation

Hale, Galina, Bonds or Loans? The Effect of Macroeconomic Fundamentals (September 2005). Yale ICF Working Paper No. 03-02; Cowles Foundation Discussion Paper No. 1403. Available at SSRN: http://ssrn.com/abstract=386080

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Contact Information

Galina Hale (Contact Author)

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3131 (Phone)
415-974-2168 (Fax)

HOME PAGE: http://www.sf.frb.org/economics/economists/index.html