Determinants of spreads on sovereign bank loans: The role of credit history

Arbeitspapier

This paper is an empirical investigation into the role of credit history in determining the spread on sovereign bank loans. It employs an error-in-variables approach used in rational-expectations-macro-econometrics to set up a structural model that links sovereign loan spreads to realized repayment behavior. Unlike the existing empirical literature, its instrumental variables method allows for distinguishing a direct influence of past repayment problems (a ”pure reputation” effect) from one that goes through increased default probabilities. Using developing country data from the period 1973-1981 and constructing continuous variables for credit history, we find that past default is a significant determinant of the spread, even after including country fixed effects. Moreover, its reduced-form effect is very similar to its structural form effect, indicating that most of the influence of past repayment problems is through the reputation channel. Overall, past and predicted future default are substantial determinants of sovereign bank loan spreads.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: MNB Working Papers ; No. 2006/1

Klassifikation und Themen

• Klassifikation: Wirtschaft ; International Finance: General ; International Lending and Debt Problems ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading ; International Financial Markets
• Thema: reputation ; sovereign bank loan spreads ; default risk ; rational expectations ; Internationaler Kredit ; Länderrisiko ; Rationale Erwartung ; CAPM ; Schätzung ; Entwicklungsländer ; Länderimage

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Benczúr, Péter ; Ilut, Cosmin
• Ereignis: Veröffentlichung
• (wer): Magyar Nemzeti Bank
• (wo): Budapest
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/83561
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ