Credit Crunch, Bank Lending and Monetary Policy: A Model of Financial Intermediation with Heterogeneous Projects
AbstractThis paper studies a credit crunch in a dynamic general equilibrium model economy with numerous and heterogeneous investment projects. Banks provide loans to endogenously arising entrepreneurs and deposit to the rest of the population. The credit crunch is caused by conservative lending policies during periods of financial duress and reduced profitability. We find that monetary policy is largely ineffective in alleviating the credit crunch, while loan regulation can erase it. Ce papier étudie un rationnement du crédit dans un modèle d'équilibre général dynamique avec des projets d'investissement nombreux et hétérogènes. Les banques offrent des services de crédit á des ménages qui décident de devenir des entrepreneurs et des services de dépôt au reste de la population. Le rationnement est causé par des politiques de prêt conservatrices pendant les périodes de contraintes financières et de profitabilité réduite. Nous trouvons que la politique monétaire ne peut résorber le rationnement, alors que la réglementation du crédit y parvient.
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Bibliographic InfoPaper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 89.
Length: 17 pages
Date of creation: Jul 1999
Date of revision:
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Credit crunch; Basle accord; heterogeneous agents; bank regulation;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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