Trade Credit, Interest Rates, and the Recent Behavior of External Lending by U.S. Banks (Crédits commerciaux, taux d'intérêt et le comportement récent des prêts extérieurs des banques américaines) (Crédito comercial, tipos de interés y el comportamiento reciente de los préstamos externos de bancos estadounidenses)

• Published in: IMF staff papers 1976-11, Vol.23 (3), p.699-717
• Main Author: Hernández-Catá, Ernesto
• Format: Article
• Language: English
• Subjects: Bank credit; Bank loans; Capital mobility; Coefficients; Imports; Interest rates; Loans; Trade credit; Variable coefficients; Variable interest rates
• ISSN: 0020-8027; 1020-7635; 1564-5150
• DOI: 10.2307/3866646

Following a decade of very modest expansion, external lending by U. S. banks registered a massive increase during the period 1972-75. The article attempts to explain this increase by focusing on U. S. bank claims on Japan, one of the most important borrowers of U. S. funds. Two salient characteristics of the period under consideration are the sharp increase in Japanese import-financing requirements, which followed the late 1973 increase in oil prices, and a substantial degree of flexibility in the yen/dollar exchange rate. Accordingly, the role of external trade financing and the influence of exchange market conditions on the effective cost of international credit are given particular attention. The Japanese demand for U. S. bank credit is explained along the lines of the "portfolio approach" to international capital movements. The desired stock of borrowing from U. S. banks is a function of the net worth of Japanese city banks, the level of Japanese imports, and a vector of expected credit costs. The elements of this vector include the nominal lending rates charged in the U. S., Euro-dollar, and Japanese markets, the expected change in the yen/dollar exchange rate, and the forward premium on the dollar. The model allows actual and desired levels of borrowing to diverge in response to changes in capital control variables. The estimation results indicate that total Japanese imports are a key factor in determining the scale of U. S. bank lending to Japan, particularly when trade credit is seen to be influenced by past as well as current import flows. The magnitude of interest rate effects is also found to be substantial, although these effects are estimated to be of a transitory nature. The empirical evidence underlines the important role of covered financial flows and suggests that expectations concerning future changes in spot rates are influenced by the countries' relative price performance but are unrelated to current or past exchange rate movements. /// Après une décennie d'expansion très modeste, les prêts extérieurs des banques américaines ont enregistré une augmentation massive au cours de la période 1972-75. Dans son article, l'auteur essaie d'expliquer cette augmentation en concentrant son attention sur les créances des banques américaines sur le Japon, l'un des plus importants emprunteurs de fonds américains. Deux faits saillants caractérisent la période considérée: la forte augmentation des besoins de financement des importations japonaises, qui