Advanced Search
MyIDEAS: Login to save this paper or follow this series

Evidence for Relational Contracts in Sovereign Bank Lending

Contents:

Author Info

  • Cosmin Ilut

    (Duke University)

  • Peter Benczur

    (Central European University)

Abstract

This paper presents direct evidence for relational (self-enforcing dynamic) contracts in sovereign bank lending. Unlike the existing empirical literature, its instrumental variables method allows for distinguishing a direct influence of past repayment problems on current spreads (a ``punishment" effect in prices) from an indirect effect through higher expected future default probabilities. Such a punishment provides positive surplus to lenders after a default, a feature that characterizes relational contracts. Using developing country data for 1973-1981 and constructing continuous variables for credit history, we find evidence that most of the influence of past repayment problems is through the direct, punishment channel.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.economicdynamics.org/meetpapers/2010/paper_91.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 91.

as in new window
Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:red:sed010:91

Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Email:
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Tuvana Pastine & Robert E. Cumby, 2000. "Emerging Market Debt : Measuring Credit Quality and Examining Relative Pricing," Departmental Working Papers, Bilkent University, Department of Economics 0010, Bilkent University, Department of Economics.
  2. Easton, Stephen T. & Rockerbie, Duane W., 1999. "What's in a default? Lending to LDCs in the face of default risk," Journal of Development Economics, Elsevier, vol. 58(2), pages 319-332, April.
  3. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  4. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2007. "A quantitative theory of unsecured consumer credit with risk of default," Working Papers 07-16, Federal Reserve Bank of Philadelphia.
  5. David Benjamin & Mark L. J. Wright, 2009. "Recovery Before Redemption: A Theory Of Delays In Sovereign Debt Renegotiations," CAMA Working Papers 2009-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  6. Guido Sandleris, 2008. "Sovereign Defaults: Information, Investment and Credit," Business School Working Papers, Universidad Torcuato Di Tella 2008-04, Universidad Torcuato Di Tella.
  7. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Feb.
  8. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," North American Stata Users' Group Meetings 2003, Stata Users Group 05, Stata Users Group.
  9. Anonymous, 2000. "Agricultural Economics Volumes 1-22, 1986-2000," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 23(2), August.
  10. Ozler, Sule, 1992. "The evolution of credit terms : An empirical study of commercial bank lending to developing countries," Journal of Development Economics, Elsevier, vol. 38(1), pages 79-97, January.
  11. David Benjamin, 2008. "Recovery Before Redemption," 2008 Meeting Papers 531, Society for Economic Dynamics.
  12. Robert H. Porter, 1983. "A Study of Cartel Stability: The Joint Executive Committee, 1880-1886," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 14(2), pages 301-314, Autumn.
  13. Raynaud, 2000. "Economie des contrats : bilan et perspectives," Working Papers 62195, Institut National de la Recherche Agronomique, France.
  14. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Nov.
  15. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Aug.
  16. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Sep.
  17. anonymous, 2000. "Reviewing economic development needs," Banking and Community Perspectives, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue 2, pages 6-7.
  18. Anonymous, 2000. "Microeconomic Reform and the Environment," Conference/Workshop Proceedings, Productivity Commission 31908, Productivity Commission.
  19. David Benjamin & Mark L. J. Wright, 2009. "Recovery Before Redemption: A Theory Of Delays In Sovereign Debt Renegotiations," CAMA Working Papers 2009-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  20. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Mar.
  21. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue May.
  22. anonymous, 2000. "Twelfth District economic update," Western economic developments, Federal Reserve Bank of San Francisco, issue Dec, pages 5.
  23. anonymous, 2000. "Strengthening the emerging market economies," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 44(Jun), pages 228-231.
  24. Tedeschi, Piero, 1994. "Cartels with Homogeneous and Differentiated Products and Imperfect Monitoring," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 635-56, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Juan J. Cruces & Christoph Trebesch, 2011. "Sovereign Defaults: The Price of Haircuts," CESifo Working Paper Series 3604, CESifo Group Munich.
  2. Fløgstad, Cathrin N. & Nordtveit, Ingvild, 2014. "Lending to developing countries: How do official creditors respond to sovereign defaults?," Working Papers in Economics 01/14, University of Bergen, Department of Economics.
  3. Christoph Trebesch & Michael G Papaioannou & Udaibir S. Das, 2012. "Sovereign Debt Restructurings 1950-2010," IMF Working Papers 12/203, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:red:sed010:91. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.