Developing Country Borrowing from a Monopolistic Lender: Strategic Interaction and Endogenous Leadership

Jafarey, S. & Lahiri, S. (2005). Developing Country Borrowing from a Monopolistic Lender: Strategic Interaction and Endogenous Leadership (Report No. 05/06). London, UK: Department of Economics, City University London.

[img]
Preview
PDF
Download (336kB) | Preview

Abstract

We develop a two-period model with endogenous investment and credit flows. Credit is subject to quantitative restrictions. With an exogenous restriction, we analyze the welfare effects of temporary tariffs. We then consider three scenarios under which a monopoly lender optimally decides the level of credit and a borrower country chooses an import tariff: one inwhich the two parties act simultaneously and two scenarios where one of them has a first-mover advantage. The equilibrium under the leadership of the borrower country is Pareto superior to the Nash equilibrium but may or may not be to that under the leadership of the lender. If the sequence of moves is itself chosen strategically, leadership by the borrower emerges as the unique equilibrium.

Item Type: Monograph (Discussion Paper)
Additional Information: © 2005 the authors
Uncontrolled Keywords: Trade intervention, investment credit, credit constraints, credit control, leader-follower
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Social Sciences > Department of Economics > Department of Economics Discussion Paper Series
URI: http://openaccess.city.ac.uk/id/eprint/1441

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics