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Federal Reserve Bank of San Francisco
Working Paper Series
A gravity model of sovereign lending: trade, default and credit
Andrew K. Rose
Mark M. Spiegel
Abstract

One reason why countries service their external debts is the fear that default might lead to shrinkage of international trade. If so, then creditors should systematically lend more to countries with which they share closer trade links. We develop a simple theoretical model to capture this intuition, then test and corroborate this idea.


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Andrew K. Rose & Mark M. Spiegel, A gravity model of sovereign lending: trade, default and credit, Federal Reserve Bank of San Francisco, Working Paper Series 2002-09, 2002.
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Keywords: International trade ; Credit ; Risk
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