Gershon Feder

Adoption of Agricultural Innovations in Developing Countries: A Survey

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A Study of Debt Servicing Capacity Applying Logit Analysis

Abstract This paper empirically investigates the importance of various economic factors in determining debt servicing capacity of borrowing countries. The paper builds on earlier work by Frank and Cline (1971) and Dhonte (1975) who tried to identify empirically the more important factors. Using logit analysis and significance tests, this paper suggests several factors which are important determinants of default probabilities. These findings are consistent with the descriptive literature on international borrowing. The estimates for predictive ability of the model are checked with alternative data and confirm a relatively low rate of error (around 4 percent).

Projecting Debt Servicing Capacity of Developing Countries

This article, Projecting Debt Servicing Capacity of Developing Countries, was reprinted with permission from the December 1981 issue of the Journal of Financial and Quantitative Analysis. Many less developed countries rely on foreign loans to fuel their economic development. In the wake of the oil crisis of 1973, many countries have experienced enormous growth in external indebtedness. Some have required loan deferral or rearrangement. This article aims to devise an empirically based composite indicator of a countrys ability and willingness to honor its foreign debt service obligations during some future time period. The examined factors are the debt service ratio, the foreign exchange reserves to imports ratio, the ratio of net noncommercial foreign exchange inflows to debt service payments, the ratio of commercial foreign exchange inflows to debt service payments, the exports to gross national product ratio, and the real per capita gross national product to U.S. per capita gross national product ratio. The model projects a countrys debt servicing capacity based on empirical data. The predictive model is intended to complement, not replace, a thorough country analysis which examines nonquantifiable factors.

Biological interactions and environmental effects in the economics of pest control

Abstract The problem of pest control is tackled in a context of an ecosystem that consists of prey-predator populations with human interaction through pesticide application. The control, aimed at reducing pest damage, results in two undesirable external effects: reduction of beneficial predator population and environmental contamination. The untapped natural equilibrium is compared with equilibrium resulting from decentralized and centralized economic decision making. It is shown that, under certain conditions, myopic decision rules increase rather than decrease the pest damage. The “user cost” (or benefit) is shown to be crucial in determining the optimal centralized policy, and its relations to the various components of the system are analyzed. The components of the user cost are analyzed to determine the level of taxes or subsidies that will yield the optimal policy.

An analysis of credit terms in the eurodollar market

Abstract A model is presented incorporating various elements involved in the determination of theinterest rate in a capital market that is not purely competitive. It yields an equilibrium relation between the interest rate and the probability of default such that higher probability implies higher interest. Other factors affecting the rate of interest are the elasticity of demand, the perceived rate of loss related to default, and an extra premium due to risk aversion. The equilibrium relation is used as an econometric model which, under appropriate specifications, generates estimates of the weights attached to subjective risk indicators. The data cover transactions in the Eurocurrency market and deal only with publicly guaranteed loans to developing countries. Several economic indicators are identified as significantly affecting the subjective probability. These can be used to generate estimates of the subjective probabilities themselves.

Storage with price uncertainty in international trade

The effects of price uncertainty in an international trade model where the possibility of storage is taken into account are investigated. The models economy comprises two food production sectors where a single factor of production is used to produce both goods. With nonincreasing risk aversion, an increase in price uncertainty leads to an increase in production of both stored and nonstored commodities and a decrease in storage for exporters of the stored commodity; importers of the stored commodity decrease production of both commodities and increase storage; with nonincreasing risk aversion and increased price uncertainty, both importers and exporters of the stored commodity tend to limit their involvement in future trade; with increased future price uncertainty, expected social welfare is reduced for all risk averse importers and exporters; with a rise in expected future price of the stored commodity, all trading countries tend to shift resources into the storage activity and away from production of both stored and nonstored goods; with an increase in current price of the stored commodity, exporters increase planned future production of the stored commodity but reduced storage. 14 references.