Cover IMF Working Papers
Buy Book in Print
Conditional Lending Under Altruism
Author:
Mr. Alex Mourmouras
Search for other papers by Mr. Alex Mourmouras in
Current site
Google Scholar Close
and
Mr. Peter Rangazas
Search for other papers by Mr. Peter Rangazas in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2004: Issue 100
Language:
English
Publication Date:
01 Jun 2004
DOI:
https://doi.org/10.5089/9781451852431.001
ISBN:
9781451852431
ISSN:
1018-5941
Pages:
24
Keywords:
WP; loan schedule; interest rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (183.3 KB) Download Epub
We analyze how the altruism of an international financial institution (IFI) towards its lowincome member countries (LICs) alters the effectiveness of its loans. We study IFI loans to a credit-constrained LIC. The IFI's repayment policy is determined by the interplay of its concerns for the welfare of the loan recipient and its fiduciary responsibilities to creditor countries. If the IFI is unable to commit to repayment terms in advance, conditional loans are superior to unconditional loans. Thus, IFI altruism and the inability to commit are sufficient reasons to equip loans with conditions. Conditional loans produce an efficient allocation of resources, so altruism is not a fundamental reason that loans fail to increase welfare.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund