Publication Date: May 1989
This paper employs panel-data econometric techniques to explore the relations between measures of credit worthiness and the debt discounts on the secondary markets. It investigates empirically whether the secondary market discounts reflect a history of past repayments problems or whether they anticipate future debt crises. The answer to this question has implications about the desirability of debt relief. The main ﬁnding is that the secondary markets do not seem rapidly to absorb economic information, which suggests that they are still in their evolutionary stage and are not very eﬀicient. The estimated models are also used to analyze issues in the international ﬁnance literature.
Debt crisis, debt relief, international ﬁnance
JEL Classification Codes: 431, 443, 411