IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Evidence for Relational Contracts in Sovereign Bank Lending

  • Cosmin Ilut

    (Duke University)

  • Peter Benczur

    (Central European University)

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.

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: https://economicdynamics.org/meetpapers/2010/paper_91.pdf
Download Restriction: no

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 Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
Email:


More information through EDIRC

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. Robert H. Porter, 1983. "A Study of Cartel Stability: The Joint Executive Committee, 1880-1886," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 301-314, Autumn.
  2. -, 1990. "Evolución de la economía brasileña," Informe Estadístico – Oficina de la CEPAL en Brasilia 28058, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  3. N/A, 1990. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 132(1), pages 9-24, May.
  4. Eichengreen, Barry & Mody, Ashoka, 2000. "Lending booms, reserves and the sustainability of short-term debt: inferences from the pricing of syndicated bank loans," Journal of Development Economics, Elsevier, vol. 63(1), pages 5-44, October.
  5. anonymous, 2000. "Twelfth District economic update," Western economic developments, Federal Reserve Bank of San Francisco, issue Dec, pages 5.
  6. Peter Benczur & Cosmin Ilut, 2011. "Evidence for Dynamic Contracts in Sovereign Bank Lending," Working Papers 11-06, Duke University, Department of Economics.
  7. -, 1990. "Economic survey of the United States, 1989," Oficina de la CEPAL en Washington (Estudios e Investigaciones) 28927, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  8. Mauricio Drelichman & Hans‐Joachim Voth, 2011. "Lending to the Borrower from Hell: Debt and Default in the Age of Philip II," Economic Journal, Royal Economic Society, vol. 121(557), pages 1205-1227, December.
  9. N/A, 1990. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 133(1), pages 7-23, August.
  10. Barbier, Edward B. & Pearce, David W., 1990. "Thinking economically about climate change," Energy Policy, Elsevier, vol. 18(1), pages 11-18.
  11. 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.
  12. Anonymous, 2000. "Microeconomic Reform and the Environment," Conference/Workshop Proceedings 31908, Productivity Commission.
  13. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue May.
  14. N/A, 1990. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 131(1), pages 6-23, February.
  15. 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.
  16. Guido M. Sandleris, 2005. "Sovereign Defaults: Information, Investment and Credit," 2005 Meeting Papers 21, Society for Economic Dynamics.
  17. Lizarazo, Sandra, 2010. "Default Risk and Risk Averse International Investors," MPRA Paper 20794, University Library of Munich, Germany.
  18. Cumby, Robert E. & Pastine, Tuvana, 2001. "Emerging market debt: measuring credit quality and examining relative pricing," Journal of International Money and Finance, Elsevier, vol. 20(5), pages 591-609, October.
  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. Natalia Kovrijnykh & Balázs Szentes, 2007. "Equilibrium Default Cycles," Journal of Political Economy, University of Chicago Press, vol. 115, pages 403-446.
  21. Juan J. Cruces & Christoph Trebesch, 2011. "Sovereign Defaults: The Price of Haircuts," CESifo Working Paper Series 3604, CESifo Group Munich.
  22. Federico Sturzenegger & Jeromin Zettelmeyer, 2007. "Creditors' Losses Versus Debt Relief: Results from a Decade of Sovereign Debt Crises," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 343-351, 04-05.
  23. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Mar.
  24. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2002. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Centro de Alti­simos Estudios Ri­os Pe©rez(CAERP) 2, Centro de Altisimos Estudios Rios Perez (CAERP).
  25. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, March.
  26. Broner, Fernando A & Lorenzoni, Guido & Schmukler, Sergio, 2007. "Why Do Emerging Economies Borrow Short Term?," CEPR Discussion Papers 6249, C.E.P.R. Discussion Papers.
  27. N/A, 1990. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 134(1), pages 7-21, November.
  28. Paul R. Milgrom & Douglass C. North & Barry R. Weingast, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, 03.
  29. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002. "Instrumental variables and GMM: Estimation and testing," North American Stata Users' Group Meetings 2003 05, Stata Users Group.
  30. -, 1990. "Nota sobre la economía brasileña," Oficina de la CEPAL en Brasilia (Estudios e Investigaciones) 28319, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  31. M. R. Wickens, 1982. "The Efficient Estimation of Econometric Models with Rational Expectations," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 55-67.
  32. N/A, 1990. "Calendar of Main Economic Events 1989," National Institute Economic Review, National Institute of Economic and Social Research, vol. 131(1), pages 86-89, February.
  33. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Aug.
  34. Jinyong Hahn & Jerry Hausman & Guido Kuersteiner, 2004. "Estimation with weak instruments: Accuracy of higher-order bias and MSE approximations," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 272-306, 06.
  35. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Feb.
  36. anonymous, 2000. "Strengthening the emerging market economies," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 44(Jun), pages 228-231.
  37. -, 1990. "International economic highlights 1989," Oficina de la CEPAL en Washington (Estudios e Investigaciones) 28926, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  38. Anonymous, 2000. "Agricultural Economics Volumes 1-22, 1986-2000," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 23(2), August.
  39. 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.
  40. anonymous, 2000. "Reviewing economic development needs," Banking and Community Perspectives, Federal Reserve Bank of Dallas, issue 2, pages 6-7.
  41. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Sep.
  42. anonymous, 2000. "Western economic developments," Western economic developments, Federal Reserve Bank of San Francisco, issue Nov.
  43. David Benjamin, 2008. "Recovery Before Redemption," 2008 Meeting Papers 531, Society for Economic Dynamics.
Full references (including those not matched with items on IDEAS)

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

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.