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From Loan Pushing to Credit Rationing: A Brief Note on Interest Shocks in a Model by Basu

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  • Thomas Ziesemer

Abstract

BASU [1991], in his introduction, argues that the 1982 debt crisis can be interpreted as a transition from loan pushing to credit rationing induced by an interest shock. He analyzes how in international lending there can be equilibria with credit rationing and with loan pushing. He, and in fact the international credit literature, does not study how one of these regimes can give way to the oter although this is crucial for his suggested interpretation of the debt crisis. In this brief note, the conditions for such a transition from loan pushing to credit rationing are formulated within the framework of Basu's model.

Suggested Citation

  • Thomas Ziesemer, 1997. "From Loan Pushing to Credit Rationing: A Brief Note on Interest Shocks in a Model by Basu," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(3), pages 569-578, September.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199709)153:3_569:flptcr_2.0.tx_2-p
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    References listed on IDEAS

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    1. Fishlow, Albert, 1985. "Lessons from the past: capital markets during the 19th century and the interwar period," International Organization, Cambridge University Press, vol. 39(3), pages 383-439, July.
    2. Jeffrey Sachs & Daniel Cohen, 1982. "LDC Borrowing with Default Risk," NBER Working Papers 0925, National Bureau of Economic Research, Inc.
    3. Jonathan Eaton & Mark Gersovitz, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(2), pages 289-309.
    4. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435, National Bureau of Economic Research, Inc.
    5. Jeffrey D. Sachs, 1989. "Developing Country Debt and Economic Performance, Volume 1: The International Financial System," NBER Books, National Bureau of Economic Research, Inc, number sach89-1, June.
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    Cited by:

    1. Ziesemer, Thomas H.W., 2024. "Linking the BOPC growth model with foreign debt dynamics to goods and labour markets: A BOP-IXSM-Okun model," Research in Economics, Elsevier, vol. 78(4).
    2. Ziesemer, Thomas, 2022. "Linking the BOPC growth model with foreign debt dynamics to the goods and labour markets," MERIT Working Papers 2022-029, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Kaushik Basu, 2016. "Beyond the Invisible Hand: Groundwork for a New Economics," Economics Books, Princeton University Press, edition 1, number 9299.

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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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