How should loan contracts for financing projects in countries with high political risk be designed? We argue that non-recourse project finance loans and the participation of development banks in the loan syndicate help mitigate political risk. We test these arguments by conducting a study with a sample of 4978 loans made to borrowers in 64 countries. Our results show that if political risk is higher, then project finance loans are more likely to be used, and development banks are more likely to participate in the syndicate. We also show that the terms of the loan contract depend not only on the political risk but also on the legal and institutional environment as well.

This paper investigates the interest rate pass-through in the euro-zone’s retail banking markets by differentiating between expected and unexpected monetary policy impulses. The paper introduces interest futures as measures of expected interest rates into pass-through studies. By allowing various specifications of the pass-through process, including asymmetric adjustment, we find a faster pass-through in loan markets when interest rate changes are correctly anticipated. In contrast, deposit markets are found to be more rigid. Overall, our results suggest that a well-communicated monetary policy is important for a speedier and a more homogenous pass-through but may also be complemented by competition policies.

Motivated by recent regulatory changes, this study investigates the degree of integration in retail lending in six core European Union (EU) countries using co-integration methodology which allows to investigate the presence and effects of structural breaks. While in the pre-break period we could detect integration to a limited degree, the evidence for integration weakened in the post-1992 period. This could however reflect a convergence process, particularly with respect to spreads. This result is clearly a regional, not a global phenomenon. As European lending rates are not yet fully integrated, the still segmented financial markets pose a challenge for a unified monetary policy.

We investigate the impact of cultural borders on the geography of international finance during stable and crises times. We employ a unique data set that focuses on Eurozone cross-border depositing during the 1999–2011 period in a gravity-model framework. We find that cultural distance limits international financial integration over and above what can be expected from economic trade and transaction costs. While we provide evidence that cultural borders lost influence during a “Europhoria” phase after the introduction of Euro notes in 2002, our findings indicate that cultural borders resurge during the 2007/2008 financial crisis and severely limit financial integration.

We examine determinants of the objective and subjective financial fragility of 2100 individuals across Australia, France, Germany, and South Africa during the COVID-19 pandemic. Objective financial fragility reflects individuals' (in)ability to deal with unexpected expenses, while subjective financial fragility reflects their emotional response to financial demands. Controlling for an extensive set of socio-demographics, we find that negative personal experiences during the pandemic (i.e., reduced or lost employment; COVID-19 infection) are associated with higher objective and subjective financial fragility. However, individuals' cognitive (i.e., financial literacy) as well as non-cognitive abilities (i.e., internal locus of control; psychological resilience) help to counteract this higher financial fragility. Finally, we examine the role of government financial support (i.e., income support; debt relief) and find that it is negatively related to financial fragility only for the economically weakest households. Our results have implications for public policymakers, providing levers for reducing individuals' objective and subjective financial fragility.