This study examines the pricing of international bank loans to LDCs as a group to ascertain if non‐price variables are dominant factors in granting these loans. Specifically, it attempts to test the hypothesis that banks, in extending Eurocredits to LDCs, have used credit rationing, rather than pricing, maturity or other variables, to respond to the perceived risks involved in such lending. Results of empirical tests for the period 1977–90 confirm that, in response to significantly higher perceived risks, lenders simply constrained the flow of credit to this group of countries.
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