The “Common Lender Effect”: Are Banking Centers Crisis Carriers?

<a href="https://embed.stanford.edu/iframe/?url=https%3A%2F%2Fpurl.stanford.edu%2Fbt094zk6864" class="su-underline">Show Content</a>

Abstract/Contents

Abstract: During the late 20th and the beginning of 21st century, a number of emerging countries, which depended on external financing, experienced a series of financial crises. The common lender effect, first proposed by Kaminsky and Reinhart (1999), asserts that a country that shares the same lender as a crisis-stricken country is more likely to also experience a financial crisis. This study adds to the literature of the common lender effect by investigating if the effect is operational despite a lack of correlation between economic fundamentals of the affected countries. The theoretical section of this paper finds that a financial shock abroad can induce investors to decrease their exposure in another country despite the lack of fundamental correlation between the two countries. By improving upon current methods proposed in Van Rijckeghem and Weder (2003) and Caramazza et al. (2004), the empirical section addresses a possible bias from endogeneity problem and provides empirical evidence in support of the common lender effect.

Type of resource	text
Date created	May 2008

Author	Takapong, Saranwut
Primary advisor	Taylor, John B.
Degree granting institution	Stanford University, Department of Economics

Subject	Stanford Department of Economics
Subject	Financial Crisis
Subject	Crisis Transmission
Subject	Debt Financing
Genre	Thesis

Related item	Title 2008 Firestone Medal for Excellence in Undergraduate Research
Location	https://purl.stanford.edu/bt094zk6864

Use and reproduction: User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.

Preferred Citation: Takapong, Saranwut. (2008). The “Common Lender Effect”: Are Banking Centers Crisis Carriers? . Stanford Digital Repository. Available at: https://purl.stanford.edu/bt094zk6864

Stanford University, Department of Economics, Honors Theses

Loading usage metrics...