02849cas a2200313 a 4500 AALejournalIMF023094 230101c9999 xx r poo 0 0eng d 20.00 USD 9798400204937 1018-5941 BD-DhAAL BD-DhAAL Fotiou, Alexandra. Contagion as a Dealmaker? : The Effect of Financial Spillovers on Regional Lending Programs / Alexandra Fotiou, Alica Ida Bonk, Georgios Manalis. Washington, D.C. : International Monetary Fund, 2022. 1 online resource (59 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The recent European sovereign debt crisis highlighted the critical role of regional lending arrangements. For the first time, European mechanisms were called to design financing programmes for member countries in trouble. This paper analyses how the risk of contagion, an essential characteristic of interlinked economies, shapes borrowing conditions. We focus on the role of spillovers as a channel of bargaining power that a country might have when asking for financial support from regional lending institutions. We build and present a new database that records both the dates on which official meetings took place, relevant statements were released and the timing of the announcements regarding loan disbursements. This database allows us to assess the defining role that announcements of future actions have in mitigating spillover costs. In addition, we study the design of lending arrangements within a recursive contract between a lender and a sovereign country. When accounting for spillover costs, arising from the borrower to the creditor, we find that it is in the lender's best interest to back-load consumption by giving more weight to future transfers in order to reduce contagion cost. Subsequently, we test and validate our theoretical predictions by assessing the effect of spillovers on loan disbursements to programme-countries and by juxtaposing lending conditions imposed by the IMF and the European mechanisms. Mode of access: Internet Intergovernmental Relations imf International Lending and Debt Problems imf International Policy Coordination and Transmission imf State and Local Government imf Ida Bonk, Alica. Manalis, Georgios. IMF Working Papers; Working Paper ; No. 2022/133 Full text available on IMF https://elibrary.imf.org/openurl?genre=journal&issn=1018-5941&volume=2022&issue=133 IMF e-Library