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Credit Crunch, Bank Lending and Monetary Policy: A Model of Financial Intermediation with Heterogeneous Projects

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Abstract

This 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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  • 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.
    • Handle: RePEc:cre:crefwp:89
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    Cited by:

    1. Peter J. Morgan, 2012. "The Role and Effectiveness of Unconventional Monetary Policy," Chapters, in: Masahiro Kawai & Peter J. Morgan & Shinji Takagi (ed.), Monetary and Currency Policy Management in Asia, chapter 2, Edward Elgar Publishing.
    2. Grégory Levieuge, 2005. "Politique monétaire et prix d'actifs," Revue de l'OFCE, Presses de Sciences-Po, vol. 93(2), pages 317-355.

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    More about this item

    Keywords

    Credit crunch; Basle accord; heterogeneous agents; bank regulation;
    All these keywords.

    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 - - - Investment; Capital; Intangible Capital; 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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