Coping with Disasters: Two Centuries of International Official Lending

Sebastian Horn, Carmen Reinhart and Christoph Trebesch

No 18, Working Papers from German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin

Abstract: Official (government-to-government) lending is much larger than commonly known, often surpassing total private cross-border capital flows, especially during disasters such as wars, financial crises and natural catastrophes. We assemble the first comprehensive long-run dataset of official international lending, covering 230,000 loans, grants and guarantees extended by governments, central banks, and multilateral institutions in the period 1790-2015. Historically, wars have been the main catalyst of government-to-government transfers. The scale of official credits granted in and around WW1 and WW2 was particularly large, easily surpassing the scale of total international bailout lending after the 2008 crash. During peacetime, development finance and financial crises are the main drivers of official crossborder finance, with official flows often stepping in when private flows retrench. In line with the predictions of recent theoretical contributions, we find that official lending increases with the degree of economic integration. In crises and disasters, governments help those countries to which they have greater trade and banking exposure, hoping to reduce the collateral damage to their own economies. Since the 2000s, official finance has made a sharp comeback, largely due to the rise of China as an international creditor and the return of central bank cross-border lending in times of stress, this time in the form of swap lines.

Keywords: International capital flows; disaster response; global financial safety net; bail-outs (search for similar items in EconPapers)
JEL-codes: E42 F33 F34 F35 F36 G01 G20 N1 N2 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Coping with Disasters: Two Centuries of International Official Lending (2021)
Working Paper: Coping with Disasters: Two Centuries of International Official Lending (2020)
Working Paper: Coping with Disasters: Two Centuries of International Official Lending (2020)
Working Paper: Coping with disasters: Two centuries of international official lending (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:pp1859:18

DOI: 10.18452/21485

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