Repayment versus Investment Conditions and Exclusivity in Lending Contracts

Spiros Bougheas, Indraneel Dasgupta, Oliver Morrissey
2011 Journal of Institutional and Theoretical Economics  
Repayment versus Investment Conditions and Exclusivity in Lending Contracts * 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 ('investment'). We build an agency model that accounts for these tendencies. The optimal conditionality contract depends on exclusivity -the likelihood that
more » ... borrower who has been denied funds from the original lenders can access funds from other lenders. JEL Classification: G21, F34 * We would like to thank Daniel Seidmann, Gianni de Fraja and seminar participants at the University of Leicester for helpful comments on an earlier version, and two anonymous referees. The usual caveat applies.
doi:10.1628/093245611796589915 fatcat:mn73fprvnrdtpdmup46bo7hsem