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Repayment versus Investment Conditions and Exclusivity in Lending Contracts

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  • Spiros Bougheas
  • Indraneel Dasgupta
  • Oliver Morrissey

Abstract

Lenders condition future loans on some index of past performance. Typically, banks condition future loans on repayments of earlier obligations, whilst international organizations (official lenders) condition future loans on the implementation of some policy action (iinvestmentj). We build an agency model that accounts for these tendencies. The optimal conditionality contract depends on exclusivity - the likelihood that a borrower who has been denied funds from the original lenders cannot access funds from other lenders.

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  • Spiros Bougheas & Indraneel Dasgupta & Oliver Morrissey, 2011. "Repayment versus Investment Conditions and Exclusivity in Lending Contracts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(2), pages 247-265, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201106)167:2_247:rvicae_2.0.tx_2-f
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    Cited by:

    1. Ronelle Burger & Indraneel Dasgupta & Trudy Owens, 2011. "A Model of NGO Regulation with an Application to Uganda," Working Papers 22/2011, Stellenbosch University, Department of Economics.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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