How to order
IMF Publications

Working Papers in full text
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 All

Other research-related activities and publications of the IMF can be found at IMF Research

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile

Fiscal Consolidation and the Cost of Credit : Evidence from Syndicated Loans

Author/Editor: Senay Agca | Deniz Igan
Authorized for Distribution: February 1, 2013
Electronic Access: Free Full Text (PDF file size is 1,207KB)
Use the free Adobe Acrobat Reader to view this PDF file.
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We examine how the cost of corporate credit varies around fiscal consolidations aimed at reducing government debt. Using a new dataset on fiscal consolidations and syndicated corporate loan data, we find that loan spreads increase with fiscal consolidations, especially for small firms, domestic firms, and for firms with limited alternative financing sources. These adverse effects are mitigated substantially if consolidations are large, and can be avoided if consolidations are also accompanied with more adaptable macroeconomic policies and implemented by a stable government. These findings suggest that lenders price the short-term recessionary effects in loans but large consolidations can reduce or undo the increase in spreads, especially under favorable country conditions, by signaling credibility and creating expansionary expectations.
Order a print copy
Series: Working Paper No. 13/36
Subject(s): Fiscal consolidation | Loans | Credit | Interest costs | Public debt
    Published:   February 1, 2013        
    ISBN/ISSN:   9781475564440/1018-5941   Format:   Paper
    Stock No:   WPIEA2013036   Pages:   44
    Price:   US$18.00
Please address any questions about this title to