The safe are rationed, the risky not – an extension of the Stiglitz-Weiss model
AbstractUsing only two risk types in the Stiglitz-Weiss model it turns out that the return function for banks has to be double hump-shaped. We derive the demand for loans and the supply of loans and find that loans are provided at two interest rates in equilibrium. The safe borrowers are rationed at the lower interest rate, whereas the risky borrowers are not rationed at all. Compared to the existing literature this suggests that the more heterogenous the risk types are, the less credit is rationed. However, credit-rationing persists in equilibrium as long as we consider a discrete number of types.
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Bibliographic InfoPaper provided by Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz in its series Working Papers with number 1108.
Length: 25 pages
Date of creation: 04 May 2011
Date of revision: 04 May 2011
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Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-24 (All new papers)
- NEP-BAN-2011-05-24 (Banking)
- NEP-MAC-2011-05-24 (Macroeconomics)
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.:
- de Meza, David & Webb, David C, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 281-92, May.
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