NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Lending Booms, Reserves, and the Sustainability of Short-Term Debt: Inferences from the Pricing of Syndicated Bank Loans

Barry Eichengreen, Ashoka Mody

NBER Working Paper No. 7113
Issued in May 1999
NBER Program(s):   IFM   ME

This paper analyzes the determinants of spreads on syndicated bank lending to emerging markets, treating the loan-extension and pricing decisions as jointly determined. Compared to the bond market, our findings highlight the role of international banks in providing credit to smaller borrowers about whom information is least complete and, more generally, support the interpretation of bank finance as dominating that segment of international financial markets characterized by the most pronounced information asymmetries. Domestic lending booms and low reserves in relation to short-term debt have been priced in the expected manner by international banks. The high level of short-term debt in East Asia was supported by high growth rates but was characterized by a knife-edge quality.

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Document Object Identifier (DOI): 10.3386/w7113

Published: Eichengreen, Barry and Ashoka Mody. "Lending Booms, Reserves And The Sustainability Of Short-Term Debt: Inferences From The Pricing Of Syndicated Bank Loans," Journal of Development Economics, 2000, v63(1,Oct), 5-44. citation courtesy of

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