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Can a "credit crunch" be efficient? Author info | Abstract | Publisher info | Download info | Related research | Statistics Edward J. Green
Soo-Nam Oh
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Two observations have sometimes been viewed as evidence that the equilibrium allocations of intermediated credit markets are inefficient. First, low-income households' marginal propensity to consume is close to unity. Second, even high-income households seem to face nonprice constraints during recessions. This paper presents a model that possesses both of these features. (A recession is modeled as an economy in which the equilibrium level of investment is at its lowest possible level.) However, contrary to the conventional view, the equilibrium of this model is ex ante efficient. The model also sheds light on some historical episodes of credit restraint.
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Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review .
Volume (Year): (1991)
Issue (Month): Fall ()
Pages: 3-17
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Handle: RePEc:fip:fedmqr:y:1991:i:fall:p:3-17:n:v.15no.4Contact details of provider: Postal: 90 Hennepin Avenue, P.O. Box 291, Minneapolis, MN 55480-0291 Phone: (612) 204-5000 Web page: http://minneapolisfed.org/ More information through EDIRC
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Keywords: Credit ; References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.:
Lawrence J. Christiano & Martin Eichenbaum & David Marshall, 1990.
"The permanent income hypothesis revisited ,"
Staff Report
129, Federal Reserve Bank of Minneapolis.
[Downloadable!]
Other versions:
Lawrence J. Christiano & Martin Eichenbaum & David Marshall, 1987.
"The Permanent Income Hypothesis Revisited ,"
NBER Working Papers
2209, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Christiano, Lawrence J & Eichenbaum, Martin & Marshall, David, 1991.
"The Permanent Income Hypothesis Revisited ,"
Econometrica ,
Econometric Society, vol. 59(2), pages 397-423, March.
[Downloadable!] (restricted) Keane, Michael P & Runkle, David E, 1992.
"On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous ,"
Journal of Business & Economic Statistics ,
American Statistical Association, vol. 10(1), pages 1-9, January.
Boyd, J.h. & Smith, B.D., 1991.
"The Equilibrium Allocation of Investment Capital in the Presence of Adverse Selection and Costly State Verification ,"
RCER Working Papers
289, University of Rochester - Center for Economic Research (RCER).
Other versions: Fumio Hayashi, 1985.
"Tests for Liquidity Constraints: A Critical Survey ,"
NBER Working Papers
1720, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Gale, Douglas & Hellwig, Martin, 1985.
"Incentive-Compatible Debt Contracts: The One-Period Problem ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 52(4), pages 647-63, October.
[Downloadable!] (restricted)
Falk, Barry L. & Lee, Bong-Soo, 2003.
"Time Series Implications of Friedman's Permanent Income Hypothesis ,"
Staff General Research Papers
11094, Iowa State University, Department of Economics.
Other versions: Runkle, David E., 1991.
"Liquidity constraints and the permanent-income hypothesis : Evidence from panel data ,"
Journal of Monetary Economics ,
Elsevier, vol. 27(1), pages 73-98, February.
[Downloadable!] (restricted)
Green, Edward J & Oh, Soo-Nam, 1991.
"Contracts, Constraints and Consumption ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 58(5), pages 883-99, October.
[Downloadable!] (restricted)
Other versions: Williamson, Stephen D., 1986.
"Costly monitoring, financial intermediation, and equilibrium credit rationing ,"
Journal of Monetary Economics ,
Elsevier, vol. 18(2), pages 159-179, September.
[Downloadable!] (restricted)
Other versions:
Full
references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Mingwei Yuan & Christian Zimmermann, 1999.
"Credit Crunch, Bank Lending and Monetary Policy: A Model of Financial Intermediation with Heterogeneous Projects ,"
Cahiers de recherche CREFE / CREFE Working Papers
89, CREFE, Université du Québec à Montréal.
[Downloadable!]
Mingwei Yuan & Christian Zimmermann, 2000.
"Financial Intermediation with Heterogeneous Projects: An Application to the Japanese Credit Crunch ,"
Cahiers de recherche CREFE / CREFE Working Papers
115, CREFE, Université du Québec à Montréal.
[Downloadable!]
Mingwei Yuan & Christian Zimmermann, 1999.
"Credit Crunch in a Model of Financial Intermediation and Occupational Choice ,"
Cahiers de recherche CREFE / CREFE Working Papers
97, CREFE, Université du Québec à Montréal.
[Downloadable!]
Other versions: David Backus & Silverio Foresi & Liuren Wu, 2002.
"Contagion in Financial Markets ,"
Finance
0207009, EconWPA.
[Downloadable!]
Urs Haegler, 1999.
"Dynamic Risk Sharing With Private Information and Costly Verification of Storage ,"
Royal Holloway, University of London: Discussion Papers in Economics
99/3, Department of Economics, Royal Holloway University of London, revised Nov 1999.
[Downloadable!]
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