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A cheap lunch for emerging markets : Removing international financial market imperfections with modern financial instruments

Title data

Bauer, Christian ; Herz, Bernhard ; Hoops, Stefan:
A cheap lunch for emerging markets : Removing international financial market imperfections with modern financial instruments.
In: World Development. Vol. 36 (2008) Issue 9 . - pp. 1514-1530.
ISSN 0305-750X
DOI: https://doi.org/10.1016/j.worlddev.2007.09.003

Abstract in another language

This paper develops a market-based procedure to significantly reduce the indebted-
ness of emerging markets by applying an asset-backed security approach to a pool of emerging
market bonds. In an extensive simulation study based on historical data, the cumulated interest
savings over a horizon of 10 years amount to about 20% of the credit sum on average (with a stan-
dard deviation of 8%) and up to 44% for individual countries—dependent on the internal distribu-
tion of the surplus. The theoretical structure of the transaction is explicitly derived in cooperation
with professionals from major commercial banks, and it implies only negligible implementation
cost. The implementation requires neither institutional reforms nor debt forgiveness, but can sup-
plement or substitute previous measures.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: emerging markets; debt crises; asset-backed securities (ABS); financial market imperfections; financial instruments
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I > Chair Economics I - Univ.-Prof. Dr. Bernhard Herz
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 02 Apr 2015 05:56
Last Modified: 02 Apr 2015 05:56
URI: https://eref.uni-bayreuth.de/id/eprint/9767