Multilateral loans and interest rates: Further evidence on the seniority conundrum

Arbeitspapier

During Europe's sovereign-debt crisis, interest rate spreads have been highly correlated with the share of multilateral loans that were considered senior to private markets. As both variables are potentially endogenous, we follow two different approaches to analyze the direction of causality. First, we use a set of IV regressions where the differences between sovereign ratings serve as instruments. Second, we analyze a new panel-survey dataset on seniority and interest rate expectations. In both approaches, we find evidence for the seniority conundrum - i.e., a positive impact of multilateral loans on interest rate spreads.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 105

Classification and Topics

• Classification: Wirtschaft ; International Lending and Debt Problems ; Asset Pricing; Trading Volume; Bond Interest Rates ; Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
• Subject: government bond spreads ; creditor seniority ; recovery rate ; interest rate ; sovereign debt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Steinkamp, Sven ; Westermann, Frank
• Event: Veröffentlichung
• (who): Osnabrück University, Institute of Empirical Economic Research
• (where): Osnabrück
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/156151
• Last update: 10.03.2025, 11:43 AM CET