Official sector lending during the euro area crisis

Corsetti, Giancarlo; Erce, Aitor; Uy, Timothy

doi:10.1007/s11558-020-09388-9

Cited by 12 publications

(15 citation statements)

References 38 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…To the best of our knowledge we are the first to collect such information. Our approach differs from Corsetti et al (2017) who collect information on changes in maturities and interest rates offered to debtor countries which occurred in 2011 and 2013. In contrast, our database contains higher frequency (daily) data on lending related announcements.…”

Section: Disbursements During the Euro Crisismentioning

confidence: 99%

“…This is the first dataset to record all the dates that announcements and statements of EU and IMF officials regarding programme-countries were made. Moreover, we extend and enrich the dataset of Corsetti et al (2017) on loan conditions (i.e., disbursements, maturities, interest rates) beyond 2011 and in higher frequency. We distinguish between the timing of announcements on the different conditionality measures and record information on announcements related to a payment of a future disburesement, the realization of a disbursement, or its revision.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Contagion as a Dealmaker? The Effect of Financial Spillovers on Regional Lending Programs

Fotiou¹,

Bonk²,

Manalis³

2022

IMF Working Papers

View full text Add to dashboard Cite

The recent European sovereign debt crisis highlighted the critical role of regional lending arrangements. For the first time, European mechanisms were called to design financing programmes f or member countries in trouble. This paper analyses how the risk of contagion, an essential characteristic of interlinked economies, shapes borrowing conditions. We focus on the role of spillovers as a channel of bargaining power that a country might have when asking for f inancial support from regional lending institutions. We build and present a new database that records both the dates on which official meetings took place, relevant statements were released and the timing of the announcements regarding loan disbursements. This database allows us to assess the defining role that announcements of future actions have in mitigating spillover costs. In addition, we study the design of lending arrangements within a recursive contract between a lender and a sovereign country. When accounting for spillover costs, arising from the borrower to the creditor, we find that it is in the lender's best interest to back-load consumption by giving more weight to future transfers in order to reduce contagion cost. Subsequently, we test and validate our theoretical predictions by assessing the effect of spillovers on loan disbursements to programme-countries and by juxtaposing lending conditions imposed by the IMF and the European mechanisms.

show abstract

Section: Disbursements During the Euro Crisismentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Contagion as a Dealmaker? The Effect of Financial Spillovers on Regional Lending Programs

Fotiou¹,

Bonk²,

Manalis³

2022

IMF Working Papers

View full text Add to dashboard Cite

show abstract

“…The lenders were the European Union (and its lending vehicles) and the International Monetary Fund. As a result, a substantial portion of the liabilities represented by the bond indebtedness of these countries migrated onto the shoulders of official sector lenders With very little publicity, those official sector lenders (apart from the IMF) have already extended the maturity of their credits and substantially reduced the interest rate on those loans (Corsetti et al., ). Depending on the outcome of the pending Greek negotiations, a further restructuring of official sector loans may be required for that country (Zettelmeyer et al., ). In an effort to preserve market access for Eurozone sovereign borrowers, the ECB has announced (but has not yet implemented) a program dubbed Outright Monetary Transactions (OMT) . OMT involves a promise by the ECB to buy the bonds of distressed Eurozone countries in the secondary market ‘in unlimited quantities’ if necessary to ensure continued market access by the debtor country. …”

Section: The Policy To Datementioning

confidence: 99%

“…Taken together, these changes reduce the net present value of the loan by roughly 40 per cent. In varying degrees, other credits extended by the EU and its lending vehicles to Greece and the other Eurozone recipients of official sector financing since 2010 have also been restructured (Corsetti et al., ).…”

Section: No Sovereign Debt Restructurings In Europe?mentioning

confidence: 99%

Sovereign Debt Restructuring in Europe

Buchheit

Gulati

2018

Global Policy

View full text Add to dashboard Cite

The Eurozone sovereign debt crisis began in the spring of 2010. Seven years on seems like an appropriate point at which to critique how the crisis has been handled and to assess whether policy changes will be required should it flare up again. In particular, there are a number of lessons to be learned from the Greek debt restructuring of 2012. Policy Implications• Investors in Euro-area sovereign bonds need to be disabused of the belief that taxpayers will bail them out at par in the event of another crisis; the result they have come to expect after the last crisis. To the extent that they continue to nurture that belief, they will neither analyze nor price their sovereign lending correctly.Global Policy (2018) 9:Suppl.1

show abstract

“…The global financial crisis presents another example of EIB's role in anti-cyclical economic policy in Europe. See, e.g.,Corsetti et al (2020) for a discussion of how the EU utilized official lending to respond to the crisis. 3 See, e.g.,Gehring and Schneider (2018) andAksoy (2010) who show that, respectively, the EU Commissioner for Agriculture and the EU President are able to influence the budget allocation in favor of their home countries.…”

mentioning

confidence: 99%

The political economy of multilateral lending to European regions

Asatryan

Havlik

2020

Rev Int Organ

View full text Add to dashboard Cite

We study the political economy of allocation decisions within a major state investment bank. Our focus is the European Investment Bank (EIB)-"The Bank of the EU"-which is the largest multilateral lending (and borrowing) institution in the world. We study the behavior of about 500 national representatives at the EIB's Board of Directors-the bank's decisive body for loan approvals-and show that a representative's appointment increases the probability that the sub-national region where she works receives a loan by about 17 percentage points. This "home-bias" effect is driven by large loans financing infrastructure projects. We discuss several pieces of evidence, which are consistent with the hypothesis that this home-bias lending may be due to favoritism, however, we cannot conclusively demonstrate this case of resource misallocation.

show abstract

Official sector lending during the euro area crisis

Cited by 12 publications

References 38 publications

Contagion as a Dealmaker? The Effect of Financial Spillovers on Regional Lending Programs

Contagion as a Dealmaker? The Effect of Financial Spillovers on Regional Lending Programs

Sovereign Debt Restructuring in Europe

The political economy of multilateral lending to European regions

Contact Info

Product

Resources

About