NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Til Debt Do Us Part: The U.S. Capital Market and Foreign Lending, 1920-1955

Barry Eichengreen

NBER Working Paper No. 2394 (Also Reprint No. r1148)
Issued in October 1987
NBER Program(s):   ITI   IFM

This paper analyzes U.S. experience with foreign lending in the half-century from 1920. A first question raised by this experience is what ignited the process of U.S. foreign lending. I conclude that lending was restrained at the beginning of the period by the debt overhang associated with reparations and by the post World War I disruption of international trade. Intervention by creditor country governments in the form of the Dawes Loan, League of Nations loans to Central Europe and reconstruction of the gold standard system was needed to initiate long-term capital flows. A second question is how to characterize the operation of the U.S. capital market once lending was again underway. I find that while lenders discriminated among potential borrowers and demanded compensation for default risk, they did so insufficiently. Neither an efficient-markets nor a fads-and-fashions model provides an adequate characterization of the data. A third question is whether default in the 1930s made it more difficult for countries to borrow in the 1940s and 1950s. I find no evidence that countries which interrupted debt service in the 1930s found it more difficult to borrow subsequently than did countries which maintained debt service continuously. Rather, default reduced access to private portfolio capital flows for defaulting and nondefaulting countries alike.

download in pdf format
   (749 K)

download in djvu format
   (487 K)

email paper

This paper is available as PDF (749 K) or DjVu (487 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2394

Published:

Users who downloaded this paper also downloaded these:
Eichengreen The U.S. Capital Market and Foreign Lending, 1920 - 1955
Courtemanche and Snowden w16245 Repairing a Mortgage Crisis: HOLC Lending and its Impact on Local Housing Markets
Eichengreen and Portes w1772 Debt and Default in the 1930s: Causes and Consequences
Corsetti, Guimaraes, and Roubini w10125 International Lending of Last Resort and Moral Hazard: A Model of IMF's Catalytic Finance
Lochner and Monge-Naranjo w13912 The Nature of Credit Constraints and Human Capital
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us