Working Paper
States as Financiers: International Lending in War and Peace
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Africa
Geoeconomics
Political Economy
War
Americas
Asia
China
Monetary Policy
International Finance
Globalization
Foreign Direct Investments
Fiscal Policy & National Budgets
Financial Markets
European Union & Euro
Emerging Markets & Developing Countries
Economic & Financial Crises
States are major international financiers, but their role is poorly understood. We study state-driven cross-border lending over two centuries using a new database covering 1.2 million official loans and grants by 134 governments and 70 multilateral institutions since 1790. We document a dual, state-contingent structure of international credit. In normal times, private creditors dominate cross-border lending. In adverse states of the world, such as wars and financial crises, official creditors step in, at times on a massive scale. These official flows are driven by great powers, are highly subsidized, and are largely absent from canonical models in international macroeconomics.
