NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Risks to Lenders and Borrowers in International Capital Markets

Benjamin E. Hermalin, Andrew K. Rose

NBER Working Paper No. 6886
Issued in January 1999
NBER Program(s):   IFM

This paper provides a framework for understanding the risks to borrowers and lenders in capital markets. We begin with a description of a capital markets in a domestic context. This allows us to focus on two key imperfections which lie at the heart of all financial systems: imperfect information, and the difficulty of making credible commitments for repayment. In the international context, these problems tend to be exacerbated. There are also two sources of risk in international borrowing that are absent in a purely domestic context: the risk that sovereign borrowers will default, and the risk of macroeconomic instability that stems from the impact of net capital flows on the monetary system.

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Document Object Identifier (DOI): 10.3386/w6886

Published: Risks to Lenders and Borrowers in International Capital Markets, Benjamin Hermalin, Andrew K. Rose, Peter M. Garber, Andrew Crockett, David W. Mullins, Jr. in International Capital Flows, Feldstein. 1999

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