International credit and welfare
some paradoxical results with implications for the organization of international lending
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Author
Contributions
- Morita, Hodaka - Contributor
- Massachusetts Institute of Technology. Dept. of Economics - Contributor
Publication
2005 - Massachusetts Institute of Technology, Dept. of Economics, Cambridge, Mass, Massachusetts
Language
English
Word Count
7,750 words, Guess
Page Count
31 pages
Identifiers
- Internet Archiveinternationalcre00basu2
- OCLC Control Number58810928
- Open LibraryOL24639542M
Description
This paper considers a developing nation that faces a foreign exchange shortage and hence its demand for foreign goods is limited both by its income and its foreign exchange balance. Availability of international credit relaxes the second constraint. We develop a simple model of strategic interaction between lending institutions and firms, and show that the availability of international credit at concessionary rates can leave the borrowing nation worse off than if it had to borrow money at higher market rates. This paradox of benevolence is then used to motivate a discussion of policies pertaining to international lending and the Southern government's method of rationing out foreign exchange to the importers. Keywords: Bank-firm interaction, foreign aid, international credit, welfare comparison. JEL Classifications: L10, F30, O10
Subjects
Series Statement
- Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 02-18
- Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 02-18.
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