Search

Begin New Search Topic Credit Publication Year within 5 Years

1. The Gendered Impact of Social Norms on Financial Access and Capital Misallocation

Author:
Arti Grover and Mariana Viollaz
Publication Date:
01-2025
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
This paper provides evidence on the nature of financial constraints faced by women entrepreneurs, especially in contexts of stringent social norms. Using micro-data from the World Bank Enterprise Surveys for 61 countries, the analysis shows that formal firms managed by women do not face credit constraints on the extensive margin. They are equally likely to apply for credit as their male counterparts and experience lower rates of credit rejection, with a higher likelihood of opening credit lines. However, on the intensive margin, firms managed by women receive lower credit amounts, indicating signs of credit constraints. This disparity in access to credit cannot be explained by gender differences in risk profiles, profitability, or productivity. However, firms managed by women have lower sales per worker, suggesting challenges in accessing product and labor markets. The paper finds suggestive evidence of capital misallocation based on gender, particularly in countries with more restrictive gender and cultural norms. Firms managed by women demonstrate a 15 percent higher average return on capital compared to firms managed by men, indicating the potential benefits of increased access to credit for women-led businesses. These findings emphasize the importance of addressing gender-specific constraints to accessing finance and promoting gender-inclusive policies to enhance firm growth and reduce capital misallocation.
Topic:
Culture, Fiscal Policy, Credit, Capital, Gender, and Social Norms
Political Geography:
Global Focus

2. Sovereign Haircuts: 200 Years of Creditor Losses

Author:
Clemens M. Graf von Luckner, Josefin Meyer, Carmen M. Reinhart, and Christoph Trebesch
Publication Date:
06-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We study sovereign external debt crises over the past 200 years, with a focus on creditor losses, or "haircuts". Our sample covers 327 sovereign debt restructurings with external private creditors over 205 default spells since 1815. Creditor losses vary widely (from none to 100%), but the statistical distribution has remained remarkably stable over two centuries, with an average haircut of around 45 percent. The data also reveal that “serial restructurings”, meaning two or more debt exchanges in the same default spell, are on the rise. To account for this trend toward serial renegotiation, we introduce the “Bulow-Rogoff haircut” – a cumulative measure that captures the combined creditor loss across all restructurings during a single debt crisis. Using this measure, we show that longer debt crises deliver larger haircuts and that interim restructurings provide limited debt relief. We further examine past predictors of the size of haircuts and identify “rules of thumb” applicable to future defaults. Poorer countries, first-time debt issuers, and those that borrowed heavily from external creditors all record significantly higher haircuts in case of a default. Geopolitical shocks – such as wars, revolutions, or the break-up of empires – deliver the deepest haircuts. Sovereign debt investment disasters are often linked to (geo-)political disasters.
Topic:
Monetary Policy, Financial Crisis, Geopolitics, Credit, Sovereign Debt, Emerging Economies, Debt Restructuring, and Sovereign Default
Political Geography:
Global Focus

3. The Incidence, Costs, and Correlates of High-Cost, High-Risk Consumer Credit Among Black and Latino Households

Author:
Edwith Theogene and Christian E. Weller
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Black and Latino households regularly have a lot less wealth than white households. Many people of color, mainly Black and Latino households, also often have to resort to more costly and risky debt than is the case for white households. We present data from FINRA’s nationally representative 2021 Financial Capability Survey on the distribution of various forms of household credit by race and ethnicity. The data show that incidences of high-cost, high-risk consumer credit is higher among Black and Latino households than among white households. Loan denials, credit market discrimination and credit steering all factors likely contributing to this greater incidence. Further, the costs associated with those forms of credit are also higher for Black and Latino households than they are for white households, even within the same types of credit. Finally, these forms of credit correlate with lower savings, especially among Black and Latino households. The results indicate that the more widespread incidence of consumer credit among Black and Latino households likely contributes to the persistence of the racial wealth gap.
Topic:
Race, Inequality, Discrimination, Credit, Wealth, and Consumer Credit
Political Geography:
North America and United States of America

4. What Determines Interfirm Trade Credit? Empirical Evidence from the ASEAN

Author:
Sasidaran Gopalan and Ketan Reddy
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This paper empirically examines the link between the heterogeneity of firms and their probability of obtaining interfirm trade credit in Asia, with a specific focus on the Association of Southeast Asian Nations (ASEAN) bloc of economies. In doing so, the paper investigates the following three issues: to what extent firm size plays a role in obtaining trade credit, to what degree a firm’s integration into global value chains affects its probability of obtaining trade credit, and the impact of agglomeration on firms’ likelihood of obtaining trade credit.
Topic:
International Trade and Finance, Trade, Global Value Chains, and Credit
Political Geography:
Asia and ASEAN

5. The ABCs of Sovereign Debt Relief

Author:
Rakan Aboneaaj, Jocilyn Estes, and Clemence Landers
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Center for Global Development (CGD)
Abstract:
We are living in a time when many countries face heightened debt vulnerabilities. Already high before the pandemic, debt levels reached a 50-year peak following the growth in government spending to combat COVID-19. Debt is not inherently bad; borrowing can allow countries to finance vital government investment. But unsustainable levels of debt can have devastating consequences for a country’s population, crowding out government spending on even basic necessities including food, medicine, and fuel imports. In Sri Lanka, for example, 71 percent of government revenue was spent on debt service before the country defaulted. Even where the tradeoff is not so dire, unsustainable debt service can limit productive investments in infrastructure, education, healthcare, and other sectors, hampering the economic growth necessary to reduce a country’s debt burden. After a decade-long period of low borrowing costs, a confluence of rising interest rates, inflation, and commodity shocks have raised the likelihood of overlapping debt crises in developing countries. The International Monetary Fund (IMF) now estimates that 30 percent of emerging market countries and 60 percent of low-income countries could face trouble paying down their debts or will soon. There is no international bankruptcy mechanism for countries that default on their external obligations. Instead, countries have historically depended on a patchwork of precedents, contracts, and conventions to bring creditors to the table for debt relief negotiations. The United States has a legacy as the lead architect of large global debt relief initiatives, from the Brady Bond plan for Latin America to the Heavily Indebted Poor Countries (HIPC) Initiative that kickstarted debt relief for poor countries in the 1990s. However, the global creditor landscape has changed significantly over the past decade. Low-income sovereigns’ largest creditors today—China and private bondholders—operate under much different principles than the leading bilateral creditors of the past, making the traditional norms and structures less effective for present debt challenges. The objective of the international financial architecture—historically overseen by the IMF and its shareholders— will be to corral these new creditors into a cooperative arrangement to deliver on debt relief.
Topic:
Debt, Development, Governance, Credit, and Sovereign Debt
Political Geography:
Global Focus

6. Domestic Revenue Mobilization and Debt Relief: The Lack of Any Link

Author:
Mark Plant and Nancy Lee
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
As the global financial community considers how to extend debt relief accompanied by IMF adjustment programs to vulnerable low-income countries, the issue of policy conditions for fiscal adjustment will inevitably arise. This paper considers the effectiveness of conditions related to domestic revenue mobilization (DRM) in the last systematic round of debt relief in the early 2000s Highly Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative (HIPC/MDRI). We find that debt relief had no impact on low-income countries’ DRM. Countries benefitting from debt relief had roughly the same DRM as those that did not. And DRM grew only slightly over time for both sets of countries. In the months to come there will be pressure to use debt restructuring and leverage to accelerate fiscal reforms and boost domestic revenue mobilization so that LICs can be seen to be contributing “their fair share” to economic recovery and transformation. Experience with the HIPC/MDRI tells us that we must be realistic in our expectations: external forces have limited impact unless combined with strong internal will and implementation capacity.
Topic:
Debt, Economics, IMF, and Credit
Political Geography:
Global Focus

7. Boom-bust Cycles Revisited: The Role of Credit Supply

Author:
Hyo Sang Kim, Sangyup Choi, and Yuri Kim
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This study investigates the impacts of credit supply on economic growth and financial crisis. Excess credit supply can make the economy and financial markets more vulnerable. While credit supply can drive economic growth by reallocating resources, it can also make the economy and financial markets more fragile. Asset prices sharply fall when deleveraging occurs in the case of a negative shock to the financial or real sector in a system where credit is excessively supplied. Furthermore, economic activity might be substantially reduced, extending the length and breadth of the recession.
Topic:
Markets, Financial Crisis, Economy, Economic Growth, and Credit
Political Geography:
Global Focus

8. Social Credit System in the People’s Republic of China. Theoretical Assumption and Implementation

Author:
Maciej Walkowski
Publication Date:
09-2022
Content Type:
Journal Article
Journal:
Polish Political Science Yearbook
Institution:
Polish Political Science Association (PPSA)
Abstract:
In the European Union, the United States and other countries of the so-called Western world, the perception of the functionalities of AI, and other instruments of Industrial Revolution 4.0 significantly differs from its perception by the PRC’s authorities, which – for a few years – have been implementing solutions aimed at comprehensive scrutiny and social supervision rather than facilitating life and work. This idea has been reflected in the so-called Social Credit System since at least 2014 and has given rise to plenty of controversies and disputes, unfortunately based on emotions and imprecise interpretation of the characteristics, aims, and implementation of the project rather than knowledge. While the new, digital model of social management in China is extensively discussed in the literature, it is rarely addressed in Polish studies, which results in the scarcity of publications on this subject. This paper attempts to fill this gap by presenting the essence of the system and the progress of its implementation.
Topic:
Economics, Hegemony, Artificial Intelligence, and Credit
Political Geography:
China and Asia

9. What Drives Credit Risk? Empirical Evidence from Southeast Europe

Author:
Nikola Fabris and Nina Vujanović
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
Bank stability is an important aspect of financial stability, especially in bank-centric systems such as those in Southeast Europe. The financial crisis has shown that there is a particular need to monitor credit and other similar risks. Hence, it is important to analyse risks affecting the stability of both the banking sector and the financial system as a whole. To that end, central banks have developed macroprudential policies aiming to safeguard financial stability. However, little is known about the drivers of some financial risks. In that context, this study analyses the determinants of credit risk, which is the most prominent risk in the banking sectors of three selected Southeast European economies – Montenegro, Kosovo* and Bosnia and Herzegovina. Dynamic panel data techniques were applied to 48 banks, which represent almost the entire banking sectors in the respective countries. The empirical evidence has shown that both macroeconomic and bank-specific determinants represent influential factors driving credit risk in Southeast Europe. Particularly important macroeconomic factors affecting credit risk are business cycle and sovereign debt. On the other hand, bank size, capital levels, credit activity and profitability are the most prominent factors influencing credit risk in the region.
Topic:
Risk, Credit, Financial Stability, and Banking
Political Geography:
Eastern Europe, Kosovo, Montenegro, and Bosnia and Herzegovina

10. Who Lends to Africa and How? Introducing the Africa Debt Database

Author:
David Mihalyi and Christoph Trebesch
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Africa’s sovereign debt markets are not well understood, partly due to a lack of data. This paper introduces the Africa Debt Database (ADD), the most granular and comprehensive dataset on external borrowing by African governments thus far. Our project moves beyond existing aggregate datasets and instead releases information on individual loans and bonds, in particular on the financial terms of each instrument. Taken together, we cover nearly 7000 loans and bonds between 2000 and 2020, with a total volume of 644 billion USD. Using this data, we study Africa’s record lending boom of the 2010s in detail. The debt boom was mainly driven by large sovereign bond issuances in London and New York, as well as growing lending by Chinese state-owned banks. The micro data also reveal a large variation in lending terms across countries, time, and creditors. Sovereign external bonds have interest rates of 6 percent, on average, Chinese banks charge 2-4 percent, and multilateral organizations just 1 percent. Strikingly, many governments in Africa simultaneously borrow large amounts from both private and official creditors, at vastly different rates. The large differences in debt servicing costs are indicative of a cross-creditor subsidy, as cheap concessional loans can be used to pay the high interest to private or Chinese creditors.
Topic:
Economics, Foreign Aid, Credit, and Influence
Political Geography:
Africa, China, and Asia