The Cyclicality of Official Bilateral Lending: Which Cycle Do Flows Follow?

39 Pages Posted: 25 Aug 2023

See all articles by Arturo Galindo

Arturo Galindo

Inter-American Development Bank

Leopoldo Avellan

Inter-American Development Bank

Tomás Gómez

Inter-American Development Bank (IDB)

Giulia Lotti

Inter-American Development Bank (IDB)

Abstract

Using a large panel of official bilateral loan data for 111 borrowing countries and 78 lending countries between 1980 and 2020, the paper shows that international government borrowing from bilateral sources is acyclical with respect to the business cycle of the borrower but procyclical with respect to the cycle of the lending country. This holds in the case of loans from advanced economies and China, the largest supplier of official bilateral lending. We find this form of procyclicality most often among middle-income recipient countries. We also find that bilateral loans follow economic links captured through bilateral trade and political ties.

Keywords: Bilateral debt, Cyclicality, Capital Flows, International government debt

Suggested Citation

Galindo, Arturo and Avellan, Leopoldo and Gómez, Tomás and Lotti, Giulia, The Cyclicality of Official Bilateral Lending: Which Cycle Do Flows Follow?. Available at SSRN: https://ssrn.com/abstract=4552196 or http://dx.doi.org/10.2139/ssrn.4552196

Arturo Galindo (Contact Author)

Inter-American Development Bank ( email )

1300 New York Av NW
Washington, DC
United States

Leopoldo Avellan

Inter-American Development Bank ( email )

Tomás Gómez

Inter-American Development Bank (IDB)

Giulia Lotti

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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