Contagion, Bank Lending Spreads and Output Fluctuations

28 Pages Posted: 31 Jan 1999 Last revised: 11 Oct 2010

See all articles by Pierre-Richard Agenor

Pierre-Richard Agenor

University of Manchester - School of Social Sciences

Joshua Aizenman

National Bureau of Economic Research (NBER)

Alexander W. Hoffmaister

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: December 1998

Abstract

This paper studies the effects of contagion on bank lending spreads and output fluctuations in Argentina. The first part presents the analytical framework, which analyzes the determination of bank lending spreads in the presence of verification and enforcement costs of loan contracts. The second part presents estimates of a vector autoregression model that relates the ex ante bank lending spread, the cyclical component of output, the real bank lending rate, and the external interest rate spread. The effects of a contagious shock (modeled as a positive historical shock in the external interest rate spread) are analyzed using generalized impulse response functions. The sock is shown to lead to an increase in domestic spreads and a reduction in the cyclical component of output. These results are consistent with the predictions of our analytical framework.

Suggested Citation

Agenor, Pierre-Richard and Aizenman, Joshua and Hoffmaister, Alexander W., Contagion, Bank Lending Spreads and Output Fluctuations (December 1998). NBER Working Paper No. w6850. Available at SSRN: https://ssrn.com/abstract=145014

Pierre-Richard Agenor (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Joshua Aizenman

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Alexander W. Hoffmaister

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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