How Creditors Gain Influence: Power and Competition in Bilateral Lending Networks

  • Bunte, J. (Contributor)
  • Brandon Kinne (Contributor)

Activity: Talk or presentationScience to science


Creditor governments use government-to-government loans to obtain influence over strategically
valuable debtors. However, identifying strategically valuable recipients goes beyond observable
factors such as geographic location or resource endowment. We argue that much of a govern-
ment’s value is subjectively defined by the assessments of other governments. Creditors take
cues from the lending practices of others in that a government’s popularity as a loan recipient
reveals other creditors’ assessments of that government’s political value. However, when ob-
serving competitor creditors making loans, governments could either engage them by providing
new loans to re-gain lost influence over the recipient; alternatively, they could also re-focus
their lending activities to debtors who are not yet under the influence of their enemies. We
subsequently derive empirically observable network effects and use inferential network models
to operationalize these implications. We find strong support that governments’ perception of re-
cipients’ strategic value depends on the behavior of others. Further, our analysis provide strong
evidence that creditors choose to specialize, rather than engage, in the face of direct financial
competition with competitor creditors. The analysis shows that interdependence is not merely
a statistical nuisance that must be controlled but is instead a driving force behind governments’
efforts to exercise political and financial influence. In fact, incorporating the strategic inter-
dependence in statistical models dramatically improves our ability to predict when and with
whom governments create new loans.
Period22 Oct 202123 Oct 2021
Event titleAnnual Meeting of the International Political Economy Society
Event typeConference
LocationBoulder, United States, ColoradoShow on map
Degree of RecognitionInternational

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502027 Political economy