Sovereign Borrowing by Developing Countries: What Determines Market Access?

By R. G. Gelos, R. Sahay, Guido Sandleris. Social Science Research Network, 2011

447 citations recorded by the source corpus.

What determines the ability of governments from developing countries to access international credit markets? We examine this question using detailed data on sovereign bond issuances and public syndicated bank loans between 1980 and 2000. A key finding of this paper is that the probability of market access is not influenced by a country's frequency of defaults, and that a default, if resolved quickly, does not reduce significantly the probability of tapping the markets. We also find that trade openness, a standard measure of a country's links with the rest of the world, and traditional liquidity and macroeconomic indicators do not help much in explaining market access. However, a country's vulnerability to shocks and the perceived quality of economic policies and institutions appear to influence the government's ability to tap the markets. We also document that the average exclusion from international credit markets following a default declined from four years in the 1980s to two years in the 1990s.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/81711b50f5b1499e6cd139b22e0999ac7c670aad

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Citations in the corpus

Costs of Sovereign Default (2006, unknown): “…current external environment has enabled recent defaulters, such as Russia, Argentina and Ecuador, to regain market access quickly.6 More generally, Gelos et al (2004) find that it only took defaulters three and half months, on average, to regain market access after defaulting during the 1990s…”
Sovereign Debt Relief and its Aftermath (2016, result): “This solid pattern of recovery is broadly consistent with Gelos, Sahay, and Sandleris (2011) and Cruces and Trebesch (2013), who nd that most countries are able to reaccess international capital markets within two to three years after exiting default.”
Default risk and risk averse international investors (2013, background): “It is possible to manipulate equation (17) to get”
Sovereign defaults and banking crises (2018, background): “The evidence collected by Gelos et al. (2011) is that emerging economies remain excluded on average 4 years after a default. This finding applies only to external defaults. It can be argued that governments have additional mechanisms (regulatory measures, moral suasion, etc.) to place their debt in ”
Defaultable Debt, Interest Rates and the Current Account (2004, unknown): “We will use the notation X̂ to represent the detrended counterpart for any variable or function X. Specifically, ât =(at/(lgCt 1)) and ĉt =(ct/(lgCt 1)).”
Fiscal Rules and the Sovereign Default Premium (2022, unknown): “…by Dias and Richmond (2007) for the median duration of exclusion using their partial access definition of 14We thank Christoph Trebesch and Mark Wright for sharing their data with us. re-entry.15 A three-year exclusion period is also within the range of estimates reported by Gelos et al. (2011).”
Long-Duration Bonds and Sovereign Defaults (Revised July 2009) (2009, unknown): “If the government chooses b′ < (1 − d)(1 − δ)b, it is issuing new bonds, and if b′ > (1 − d)(1 − δ)b, the government is purchasing bonds.”
Sovereign default and debt renegotiation (2010, unknown): “Gelos et al (2003) find that it takes less than one year for defaulted countries to regain access to international financial markets in the 1990s.”
Sovereign Default, Interest Rates and Political Uncertainty in Emerging Markets (2008, result): “The probability of reentering …nancial markets after default ¹ is set to 0.1 which is in line to the estimates of Gelos et al. (2003).”
Default risk and income fluctuations in emerging economies (2008, unknown): “The calibrated probability to re-enter financial markets of 0.282 is consistent with the estimates of Gelos et al. (2002) who find that during the default episodes of the 1990s, economies were excluded from the credit markets only for a short period of time.”
Holdouts in Sovereign Debt Restructuring: A Theory of Negotiation in a Weak Contractual Environment (2012, unknown): “The strategic holdup e¤ect generalizes to many creditors under the constant-bargainingshare protocol: Delay occurs as creditors seek to take advantage of the larger settlements available in later subgames since by (26) vi is decreasing in i.”