Violent Conflict and Cross-Border Lending

Ralph De Haas, Mikhail Mamonov, Alexander Popov and Iliriana Shala

No 19743, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: How do violent conflicts shape cross-border lending? Using syndicated loan data on 14,021 creditors and 97,169 firms across 179 countries, we document a dual response. Relative to domestic creditors, foreign lenders reduce overall lending by 27% (supply-driven) but increase lending to military-related sectors by 24% (demand-driven). This reallocation is concentrated among lenders with military-sector expertise but limited country specialization, and flows toward politically non-aligned conflict zones. Pre-conflict exposure to cross-border lenders is associated with divergent firm-level outcomes: military firms expand assets, revenues, and employment, while exposed civilian firms contract. Violent conflicts thus selectively redirect, rather than uniformly suppress, cross-border credit.

Keywords: Cross-border; lending (search for similar items in EconPapers)
JEL-codes: D74 F34 G15 G21 H56 (search for similar items in EconPapers)
Date: 2024-12
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