On the determinants and resilience of bond flows to LDCs, 1990-1995

Bond flows to Less Developed Countries (LDCs) proved more resilient than ex pected to the rising US interest rates during 1994, raising hopes that the current episode of private capital flows to LDCs may not end in a widesprea d crisis as its predecessors in the 1920s and 1970s did. Global bond issuan ce, a significant determinant of the flows that recovered quickly from the first interest-rate rise in February 1994, explains this resilience. It can also help the flows withstand future cyclical interest rate rises, as long as the ongoing process of international portfolio diversification continue s fueling it. (C) 2000 Elsevier Science Ltd. All rights reserved.