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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 and 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.

Suggested Citation

  • Enrico Minelli & Salvatore Modica, 2009. "Credit Market Failures and Policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(3), pages 363-382, June.
    • Handle: RePEc:bla:jpbect:v:11:y:2009:i:3:p:363-382
    DOI: 10.1111/j.1467-9779.2009.01414.x
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