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Concerted Lending: Did Large Banks Bear The Burden?

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  • Spiegel, Mark M.

Abstract

A game-theoretic model of lending with banks heterogeneous by size is introduced in which atomistic small banks free ride on the relending efforts of a large bank. An empirically-testable corollary conclusion suggests that "news" concerning the underlying economic condition of the debtor nation will have a greater impact on the large bank. This empirical prediction is validated for the Latin American Crisis period using evidence from long-term bond spread data. Poolings of cross-sectional time-series data reveal that the equity values of large banks are relatively more sensitive to adverse "news" concerning the quality of Latin American loans. Copyright 1992 by Ohio State University Press.

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File URL: http://econ.as.nyu.edu/docs/IO/9394/RR89-24.pdf
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Bibliographic Info

Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 89-24.

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Length: 40 pages
Date of creation: 1989
Date of revision:
Handle: RePEc:cvs:starer:89-24

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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
Phone: (212) 998-8936
Fax: (212) 995-3932
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Web page: http://econ.as.nyu.edu/object/econ.cvstarr.html
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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
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Related research

Keywords: banks ; lending policies ; empirical methods ; loans ; economic models;

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Cited by:
  1. Mark M. Spiegel, 2000. "Solvency runs, sunspot runs, and international bailouts," Working Paper Series 2001-05, Federal Reserve Bank of San Francisco.
  2. Woller, Gray M. & Phillips, Kerk, 1995. "LDC default probabilities and U.S. commercial banks: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 4(4), pages 333-352.
  3. Jonathan Eaton & Raquel Fernandez, 1995. "Sovereign Debt," NBER Working Papers 5131, National Bureau of Economic Research, Inc.
  4. Spiegel, Mark M., 1990. "Threshold effects in international lending," Policy Research Working Paper Series 394, The World Bank.
  5. Mark M. Spiegel, 1994. "Fixed-premium deposit insurance and international credit crunches," Working Papers in Applied Economic Theory 94-19, Federal Reserve Bank of San Francisco.

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