External shocks, bank lending spreads, and output fluctuations

Pierre Richard Agénor, Joshua Aizenman, Alexander W. Hoffmaister

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

This paper studies the effects of external shocks on bank lending spreads and output fluctuations in Argentina during the early 1990s. The first part presents the analytical framework. The second presents a VAR model that relates bank lending spreads, the cyclical component of output, the real lending rate, and the external interest rate spread. Impulse response functions show that a positive shock in external spreads leads to higher domestic spreads and lower output. Historical decompositions show that shocks to external spreads in the immediate aftermath of the Mexican peso crisis had a sizable effect on movements in output and domestic spreads.

Original languageEnglish
Pages (from-to)1-20
Number of pages20
JournalReview of International Economics
Volume16
Issue number1
DOIs
StatePublished - 1 Feb 2008
Externally publishedYes

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