Contagion, Bank Lending Spreads and Output Fluctuations

Pierre-Richard Agénor, Joshua Aizenman and Alexander Hoffmaister

No 6850, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E44 F36 (search for similar items in EconPapers)
Date: 1998-12
New Economics Papers: this item is included in nep-tid
Note: IFM
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Citations: View citations in EconPapers (19)

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Working Paper: Contagion, bank lending spreads, and output fluctuations (1999)
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