TY  - JOUR
AU  - Aizenman,Joshua
AU  - Marion,Nancy P.
TI  - Uncertainty and the Disappearance of International Credit
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7389
PY  - 1999
Y2  - October 1999
UR  - http://www.nber.org/papers/w7389
L1  - http://www.nber.org/papers/w7389.pdf
N1  - Author contact info:
Joshua Aizenman
Department of Economics;  E2
1156 High St.
University of California, Santa Cruz
Santa Cruz, CA  95064
Tel: 831/459-4791
Fax: 831/459-5077
E-Mail: jaizen@ucsc.edu

Nancy Marion
Department of Economics
Dartmouth College
Hanover, NH  03755
E-Mail: Nancy.P.Marion@Dartmouth.EDU
AB  - We show that increased uncertainty about the size of an emerging market's external debt has a nonlinear and potentially large adverse effect on the supply of international credit offered to them. We also show that if international creditors are first- order risk averse, attaching greater weight to utility derived from bad outcomes than from good ones, a moderate increase in uncertainty about debt overhang or about other relevant factors affecting repayment  prospects-- can cause the supply of credit to dry up completely.   We therefore offer one possible explanation for why emerging markets may find themselves suddenly cut off from international capital markets.
ER  -