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A Reconsideration of the Stiglitz-Weiss Model with a Discrete Number of Borrower Types

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Author Info
Susanne Steger
Helke Waelde
Abstract

In this paper we show that the equilibrium in the Stiglitz-Weiss model (Stiglitz and Weiss, 1981) is a two-interest rate equilibrium. For this we use the true return-function for banks shown by Arnold (2005), the assumption of Bertrand competition and make a consideration for a discrete number of borrowers. Rationing only affects one group of the borrowers, i.e. the borrowers with a safe project. The risky group always receives the funds it demands.

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File URL: http://www.bgpe.de/texte/DP/028_steger_waelde.pdf
File Format: application/pdf
File Function: First version, 2007
Download Restriction: no

Publisher Info
Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 028.

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Length: 20 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:bav:wpaper:028_steger_waelde

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Web page: http://www.bgpe.de/
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Related research
Keywords: credit rationing asymmetric information adverse selection

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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