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External Shocks, Bank Lending Spreads, and Output Fluctuations *
Author(s) -
Agénor PierreRichard,
Aizenman Joshua,
Hoffmaister Alexander W.
Publication year - 2008
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2007.00658.x
Subject(s) - economics , monetary economics , shock (circulatory) , impulse response , interest rate , vector autoregression , econometrics , medicine , mathematical analysis , mathematics
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.