BANK LENDING TO LDCs: LESSONS FROM THE 1970s

Abstract

We use a recently-compiled database with monthly observations, to analyse the determinants of syndicated loans to Latin American (L.A.) and East Asian countries, for the period 1972-1982. Our results indicate that the loans were to a large extent supply-driven, and thus provide econometric evidence that “overlending” was a significant determinant of them along with economic fundamentals in the borrowing countries. They also suggest that E. Asia's recent currency and banking crises will not likely develop into another “debt crisis”, precipitated by a prolonged withdrawal of private capital from the region. [F34, G15, N25, N26]