Credit Crunch in a Model of Financial Intermediation and Occupational Choice
AbstractIn this paper, we introduce a dynamic general equilibrium model with numerous and heterogeneous investment projects and endogenous occupational choice to study a credit crunch. The investment decision is determined through the occupational choice of households which is driven by the endogenous accumulation of assets as they face various employment and return risks over a long lifetime. Consistent with empirical evidence, the origin of a credit crunch may be found in the conservative lending policies by banks during periods of financial duress and reduced profitability, but not informational problems as in the extant literature. Monetary policy is shown to be largely ineffective in alleviating the credit crunch, while flexible loan regulation can erase it. Dans ce papier, nous introduisons un modèle d'équilibre général dynamique avec de nombreux projets d'investissement hétérogènes et des choix endogènes d'occupation pour étudier une contraction excessive du crédit. La décision d'investissement est déterminée par l'intermédiaire du choix occupationnel du ménage, lui-même dépendant de l'accumulation endogène d'actifs en raison de divers risques d'emploi et de rendement sur une longue durée de vie. Comme cela est indiqué par l'évidence empirique, l'origine d'une contraction excessive du crédit peut être trouvée dans les politiques de crédit conservatrices des banques lors de périodes contraintes financières et de profitabilité réduite, mais sans les problèmes d'information nécessaires dans le reste de la littérature. La politique monétaire s'avère être en grande partie inefficace à combattre ce resserrement du crédit, alors qu'une réglementation flexible des crédits 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 97.
Length: 27 pages
Date of creation: Dec 1999
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Credit crunch; Basle accord; heterogeneous agents; bank regulation;
Other versions of this item:
- Yuan, Mingwei & Zimmermann, Christian, 2004. "Credit crunch in a model of financial intermediation and occupational choice," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 637-659, December.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: 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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