International debt and financial crises in emerging market economies

This dissertation analyzes the access of emerging market borrowers to international debt markets and specifically their decision of whether to borrow from banks or on the bond market as well as the contagion effects in international bond markets.; The choice between bonds and loans is modeled using a framework that focuses on the implications of asymmetric information. The model predicts that borrowers from countries where economic and political risks are highest will not have market access. More substantively, it predicts that borrowers from countries where economic and political risks are somewhat lower will issue junk bonds, while those from countries where risks are still lower will borrow from banks, and that borrowers from the lowest risk countries will issue high-quality (“investment grade”) bonds.; These predictions are then tested using the data on primary bond issues and loan contracts by emerging market borrowers during the 1990s. A censored regression model with random effects, estimated using simulated maximum likelihood, supports the predictions of the model and reveals the variables that affect the choice of debt instrument at each end of the risk spectrum.; The same data set is used for the empirical analysis of the effect of financial crises on the international bonds issuance, maturity and spreads. The results show that financial crises of the 1990s had regional effects on issuance and spreads due to change in investor sentiments, while maturity remained unaffected.