ABSTRACT
This chapter uses a novel analytical framework, borrowed from the theory of finance, to reconsider two of the central questions posed by the lessdeveloped-country (LDC) debt crisis. Did systematic-risk factors, including the behavior of the credit-supply function, significantly affect LDC creditworthiness-and hence, LDC repayments difficulties-in the 1970s and 1980s? Did international banks adequately incorporate systematic-risk factors in their lending decisions for LDCs?
