Overseas indebtedness, country risk and interest rates

Overseas Assembly and Country Sourcing Choices

The fragmentation of production has resulted in an increasing degree of vertical specialization across countries. This paper studies one venue that has facilitated growth in U.S. vertical specialization, the program known as 9802 in the current tariff code, or alternatively as the overseas assembly provision, or OAP, in earlier years. The empirical analysis examines how the cross-country patter...

Country Competition and U.S. Overseas Assembly

To examine the role of international competition in outsourcing production decisions, I study the decisions of producers who used the U.S. Overseas Assembly Program (OAP) to conduct assembly operations in developing countries. The evidence, which is based on U.S. OAP imports between 1991 to 2000, shows that production costs and corporate tax policies both shaped production decisions. While incr...

Market Risk Premium and Interest Rates

Hedging~interest Rate Risk with Options on Average Interest Rates

MARCH 1995 Hedging interest rate risk has become one of the most common and important types of a financial manager's risk management activities. A classic example is for a firm to hedge its cost of funds by using an interest rate cap to place an upper bound on its borrowing costs. The hedge typically consists of a sequence of individual call options on the interest rate, with option expiration ...

Endogenous Risk Structure of Interest Rates

In this paper we investigate the behavior of credit yield spreads in an equilibrium framework in which the risk-free interest rate and yields on risky debt are jointly and endogenously determined. The model is one of a partially observable pure exchange economy in which debt is a contingent claim on the cash flow. We find that an increase in risk aversion or an increase in uncertainty about gro...