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A Schumpeterian analysis of the credit market

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  • Messori, Marcello
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    Abstract

    Schumpeter shows that bank credit acts as money-capital and, therefore, constitutes the necessary premise for the realization of the innovative processes planned by entrepreneurs. This makes it important to specify the debt contracts between each bank and entrepreneurs during the prosperity phase of Schumpeter's cyclical development. The present paper aims to point out the achievements and the limits of Schumpeter's monetary theory with respect to this point, that is the debt contract design. On the side of the limits, I maintain that Schumpeter's approach, although representing one of the most stimulating contributions in the history of economic analysis, asks for refinements as regard to the objective-function of the individual banks, the determination of the interest rates, and the usableness of the credit demand and supply curves. Schumpeter's posthumous treatise on money provides stimulating insights for the definition of these refinements.

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    Bibliographic Info

    Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

    Volume (Year): 28 (2014)
    Issue (Month): C ()
    Pages: 43-59

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    Handle: RePEc:eee:streco:v:28:y:2014:i:c:p:43-59

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    Web page: http://www.elsevier.com/locate/inca/525148

    Related research

    Keywords: Banking activity; Monetary theory; Development; History of economic analysis;

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    1. Joseph E. Stiglitz & Andrew Weiss, 1988. "Banks as Social Accountants and Screening Devices for the Allocation of Credit," NBER Working Papers 2710, National Bureau of Economic Research, Inc.
    2. Parth J. Shah & Leland B. Yeager, 1994. "Schumpeter on Monetary Determinacy," History of Political Economy, Duke University Press, vol. 26(3), pages 443-464, Fall.
    3. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, December.
    4. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    5. Messori, Marcello & Tamborini, Roberto, 1995. "Fallibility, Precautionary Behaviour and the New Keynesian Monetary Theory," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(4), pages 443-64, November.
    6. Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804.
    7. Hicks, John, 1989. "A Market Theory of Money," OUP Catalogue, Oxford University Press, number 9780198287247.
    8. Yanelle, Marie-Odile, 1989. "The strategic analysis of intermediation," European Economic Review, Elsevier, vol. 33(2-3), pages 294-301, March.
    9. Sharpe, Steven A, 1990. " Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, vol. 45(4), pages 1069-87, September.
    10. Innes, Robert, 1991. "Investment and government intervention in credit markets when there is asymmetric information," Journal of Public Economics, Elsevier, vol. 46(3), pages 347-381, December.
    11. Stiglitz, Joseph E & Weiss, Andrew, 1992. "Asymmetric Information in Credit Markets and Its Implications for Macro-economics," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 694-724, October.
    12. Milde, Hellmuth & Riley, John G, 1988. "Signaling in Credit Markets," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 101-29, February.
    13. Marcello Messori, 1997. "The Trials and Misadventures of Schumpeter's Treatise on Money," History of Political Economy, Duke University Press, vol. 29(4), pages 639-673, Winter.
    14. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
    15. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
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