Working Paper: CEPR ID: DP3539
Authors: Andrew K. Rose; Mark Spiegel
Abstract: One reason why countries service their external debts is the fear that default might lead toshrinkage of international trade. If so, then creditors should systematically lend more to countrieswith which they share closer trade links. We develop a simple theoretical model to capture thisintuition, then test and corroborate this idea.
Keywords: bank; bilateral; empirical; loan; panel; theory
JEL Codes: F13; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| debt servicing (F34) | trade (F19) |
| trade ties (F10) | comparative advantage in lending (F34) |
| trade-lending hypothesis (F65) | reputation-based models of sovereign lending (F34) |
| bilateral trade (F10) | lending patterns (F34) |