This paper builds a new dataset with detailed information on the universe ofThe paper is here
foreign government bonds issued in New York in the 1920s and uses these data to
describe the behavior of the financial intermediaries which operated in the New
York market during the period leading to the interwar debt crisis. The paper
starts by showing that concerns over reputation played an important role in
intermediaries‘ underwriting choices. Next, the paper checks whether banks
managed to charge abnormal underwriting fees on bonds that would eventually
default and finds no evidence of such practice (―banksterism‖). The paper
concludes by discussing some parallels between the experience of the 1920s and
the current debate on the "originate and distribute" model.
Abstract:
This paper updates our previous work on the level and evolution of original sin. It shows that while the number of countries that issue local-currency debt in international markets has increased in the past decade, this improvement has been quite modest. Although we find that countries have been borrowing at home, thanks to deepening domestic markets, we document that foreign participation in these markets is more limited than what is usually assumed. The paper shows that the recent decline of currency mismatches and the consequent ability to conduct countercyclical macroeconomic policies is due to lower net debt (abstinence) and not to redemption from original sin. We conclude that original sin continues to make financial globalization unattractive and developing countries have opted for abstinence because foreign currency debt is too risky. The promised paradise of financial globalization will need to wait for redemption from original sin.
Moyo is less convincing, however, when she tries to argue that aid itself has been the crucial factor holding Africa back, and she verges on deliberate provocation when she proposes terminating all aid within five years -- a proposal that is both impractical (given existing long-term commitments) and unhelpful (since an abrupt withdrawal of aid would leave chaos in its wake).
Dastrup and Carson look at how the magnitudes of the price declines correlate with a number of other community characteristics such as overbuilding (as measured by growth in building permits relative to the local labor force), extent of subprime lending, owner-occupied units, and fundamentals such as median income. Dastrup and Carson find that all of these measures were statistically significantly related to the magnitude of the housing price decline. But by far the most important variable was the magnitude of the previous price run-up, which all by itself can account for more than half of the observed variance in the size of the price decline across different communities.
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