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External Shocks, Bank Lending Spreads, and Output Fluctuations

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  • Pierre‐Richard Agénor
  • Joshua Aizenman
  • Alexander W. Hoffmaister

Abstract

This paper studies the effects of external shocks on bank lending spreads and output fluctuations in Argentina during the early 1990s. The first part presents the analytical framework. The second presents a VAR model that relates bank lending spreads, the cyclical component of output, the real lending rate, and the external interest rate spread. Impulse response functions show that a positive shock in external spreads leads to higher domestic spreads and lower output. Historical decompositions show that shocks to external spreads in the immediate aftermath of the Mexican peso crisis had a sizable effect on movements in output and domestic spreads.

Suggested Citation

  • Pierre‐Richard Agénor & Joshua Aizenman & Alexander W. Hoffmaister, 2008. "External Shocks, Bank Lending Spreads, and Output Fluctuations," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 1-20, February.
    • Handle: RePEc:bla:reviec:v:16:y:2008:i:1:p:1-20
    DOI: 10.1111/j.1467-9396.2007.00658.x
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    References listed on IDEAS

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    1. Tarsila Segalla Afanasieff & Priscilla Maria Villa Lhacer & Márcio I. Nakane, 2002. "The Determinants of Bank Interest Spread in Brazil," Money Affairs, CEMLA, vol. 0(2), pages 183-207, July-Dece.
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    Cited by:

    1. Li, Jinyue, 2018. "Sudden stops, financial frictions, and the banking sector," Journal of International Money and Finance, Elsevier, vol. 87(C), pages 144-154.
    2. Caballero, Julián & Fernández, Andrés & Park, Jongho, 2019. "On corporate borrowing, credit spreads and economic activity in emerging economies: An empirical investigation," Journal of International Economics, Elsevier, vol. 118(C), pages 160-178.
    3. Akıncı, Özge, 2013. "Global financial conditions, country spreads and macroeconomic fluctuations in emerging countries," Journal of International Economics, Elsevier, vol. 91(2), pages 358-371.
    4. Caballero, Julián & Fernández, Andrés & Park, Jongho, 2019. "On corporate borrowing, credit spreads and economic activity in emerging economies: An empirical investigation," Journal of International Economics, Elsevier, vol. 118(C), pages 160-178.
    5. repec:zbw:bofrdp:2017_031 is not listed on IDEAS
    6. Julián Caballero & Andres Fernandez & Jongho Park, 2016. "On Corporate Borrowing, Credit Spreads and Economic Activity in Emerging Economies: An Empirical Investigation," IDB Publications (Working Papers) 95296, Inter-American Development Bank.
    7. Caballero, Julián & Fernández, Andrés, 2017. "On corporate borrowing, credit spreads and economic activity in emerging economies: An empirical investigation," Bank of Finland Research Discussion Papers 31/2017, Bank of Finland.
    8. Taiyo Yoshimi, 2014. "Lending Rate Spread Shock and Monetary Policy Arrangements: A Small Open Economy Model for ASEAN Countries," Asian Economic Journal, East Asian Economic Association, vol. 28(1), pages 19-39, March.

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