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Credit Market Failures and Policy

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  • Enrico Minelli
  • Salvatore Modica

Abstract

In a simplified version of the Stiglitz–Weiss (1981) model of the credit market we characterize optimal policies to correct market failures. Widely applied policies, notably interest–rate subsidies and investment subsidies, are compared to the theoretical optimum. Some comments on the trade-off between credit subsidy and infrastructural investment are added in the conclusions.

Suggested Citation

  • Enrico Minelli & Salvatore Modica, 2006. "Credit Market Failures and Policy," Working Papers ubs0607, University of Brescia, Department of Economics.
    • Handle: RePEc:ubs:wpaper:ubs0607
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    References listed on IDEAS

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