Ldc Borrowing with Default Risk

56 Pages Posted: 8 Jun 2004 Last revised: 14 Jul 2022

See all articles by Jeffrey D. Sachs

Jeffrey D. Sachs

Columbia University - Columbia Earth Institute; National Bureau of Economic Research (NBER)

Daniel Cohen

Ecole Normale Superieure (ENS) - Department and Laboratory of Applied and Theoretical Economics (DELTA); Centre for Economic Policy Research (CEPR)

Date Written: July 1982

Abstract

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

Suggested Citation

Sachs, Jeffrey D. and Cohen, Daniel, Ldc Borrowing with Default Risk (July 1982). NBER Working Paper No. w0925, Available at SSRN: https://ssrn.com/abstract=226911

Jeffrey D. Sachs (Contact Author)

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Daniel Cohen

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