Decomposing Interest Differentials: An International Borrowing and Lending Approach

Makin, Anthony J.

doi:10.11130/jei.2004.19.1.192

Cited by 1 publication

(3 citation statements)

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“…So far, very little work has been identified on the basic causes of rising shares of short-term external debt. The theoretical works include those by Broner, Lorenzoni, and Scmukler (2013), Balta, Fernandez, and Ruscher (2013), Kose and Prasad (2010), Makin (2004), Schmukler and Vesperoni (2006), Broner, Lorenzoni, and Scmukler (2004) and Mama (Mama, 2008). Different authors mention different factors as potential determinants of short-term foreign debt, and there is generally no consensus regarding the most important factors influencing short-term foreign debt or the maturity of foreign debt.…”

Section: Introductionmentioning

confidence: 99%

“…The disparity between the domestic interest rate and the international rate is also mentioned in the literature as one of the causes of changes in a country's short-term foreign debt stock. For instance, Makin (2004) explains that domestic interest rates in small open economies are usually higher than international rates due to uncertainties and country risk factors in the domestic economy. Broner et al (2013;2004) similarly maintain that emerging and developing economies borrow short-term due to the higher risk premium charged by international capital markets on long-term debt, changes in the bondholder's risk aversion and in the country's expected repayment capacity.…”

Section: Introductionmentioning

confidence: 99%

“…For instance, Makin (2004) explains that domestic interest rates in small open economies are usually higher than international rates due to uncertainties and country risk factors in the domestic economy. Broner et al (2013;2004) similarly maintain that emerging and developing economies borrow short-term due to the higher risk premium charged by international capital markets on long-term debt, changes in the bondholder's risk aversion and in the country's expected repayment capacity. Mama, 2008) likewise suggests that a small open economy borrower that has lower growth prospects is more willing to choose a short-term debt contract, which gives rise to an increase in its short-term indebtedness.…”

Section: Introductionmentioning

confidence: 99%

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Macro-determinants of short-term foreign debt in Ghana

Brafu‐Insaidoo

Ahiakpor

Ogeh

et al. 2019

Cogent Economics & Finance

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This study tests the validity of the hypothesis that the regulatory and macroeconomic environments and the disparity between domestic and international interest rates are important determinants of short-term foreign debt stock in a developing economy like Ghana. This study employs a time series econometric analysis of annual secondary data covering the period 1970 to 2012. More specifically, the bounds testing approach is used to estimate the impact of potential determinants-identified in the theoretical and empirical literature-on the real stock of short-term foreign debt in Ghana. The study finds that a reduction in regulatory restrictions on external borrowing, a widening of the disparity between domestic and international interest rates, economic growth performance and domestic financial deepening lead to increases in the shortterm foreign debt stock in both the long and short run, respectively. The short-term foreign debt stock reduces in response to an increase in trade openness in the short run, and to international debt relief initiatives by multilateral development institutions in the long run.

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