The Ideal Loan and the Patterns of Cross-Border Bank Lending
13 February 2014 4:00 pm
Jörn Kleinert (with Bettina Brüggemann and Esteban Prieto), Karl-Franzens-University Graz
wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)
A typical loan offer is a differentiated product with various negotiated characteristics (maturity, amount, timing, collateral, disclosure requirements) which involve costs that go beyond the mere interest rate. Taking into account all costs, a firm chooses the cost minimizing loan offer. Based on this decision criterion, we derive the probability of a firm from country i to choose a loan contract from a bank in country j. We use this probability to derive a gravity equation for cross-border bank loans. Finally, we estimate the gravity equation based on the theoretical model controlling for the unobserved heterogeneity proposed by our theoretical model.
This seminar series is an activity in the framework of FIW ('Forschungsschwerpunkt Internationale Wirtschaft'), which is a project designed to build a center of excellence in research on International Economics, funded by the Austrian Ministry of Economics, Family and Youth.
Paper and Powerpoint presentation, as far as available, are posted on this page after the seminar.
Keywords: Product differentiation, Gravity Equation, Cross-border bank lending
JEL classification: L14, F34, G21