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The Welfare Implications of Costly Monitoring in the Credit Market: A Note

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  • Xu, Bin

Abstract

Hillier and Worrall (1994) derived a surprising result that credit should be further rationed in the costly-monitoring credit-rationing equilibrium. This note shows that their result may be reversed if monitoring costs are endogenously determined.

Suggested Citation

  • Xu, Bin, 2000. "The Welfare Implications of Costly Monitoring in the Credit Market: A Note," Economic Journal, Royal Economic Society, vol. 110(463), pages 576-580, April.
    • Handle: RePEc:ecj:econjl:v:110:y:2000:i:463:p:576-80
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    Cited by:

    1. Parker, Simon C, 2002. "Do Banks Ration Credit to New Enterprises? And Should Governments Intervene? President's Lecture Delivered at the Annual General Meeting of the Scottish Economic Society 4-5 September 2001," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(2), pages 162-195, May.
    2. Bappaditya Mukhopadhyay, 2002. "Costly state verification and optimal investment," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 26(3), pages 233-248, September.
    3. Becchetti, Leonardo & Sierra, Jaime, 2003. "Bankruptcy risk and productive efficiency in manufacturing firms," Journal of Banking & Finance, Elsevier, vol. 27(11), pages 2099-2120, November.
    4. Urs W. Birchler, 2000. "Are banks excessively monitored?," Working Papers 00.14, Swiss National Bank, Study Center Gerzensee.

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