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Credit Rationing and Rational Behavior

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  • Antzoulatos, Angelos A

Abstract

This paper shows that optimal consumption is weakly increasing in the borrowing ceiling, while savings and the welfare losses caused by borrowing constraints are weakly decreasing. More important, the strict inequalities may hold even at high saving levels at which the constraints are not expected to bind any time soon. In essence, the paper shows that one can make a smooth transition between the two extremes of free and no borrowing. Further, quantitative versions of the theory demonstrate that the distortive impact of borrowing constraints depends upon all the parameters of the economic environment in a complicated way. Copyright 1994 by Ohio State University Press.

Suggested Citation

  • Antzoulatos, Angelos A, 1994. "Credit Rationing and Rational Behavior," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 182-202, May.
  • Handle: RePEc:mcb:jmoncb:v:26:y:1994:i:2:p:182-202
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    Cited by:

    1. Antzoulatos, Angelos A., 2002. "Arbitrage opportunities on the road to stabilization and reform," Journal of International Money and Finance, Elsevier, vol. 21(7), pages 1013-1034, December.
    2. Bacchetta, Philippe & Gerlach, Stefan, 1997. "Consumption and credit constraints: International evidence," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 207-238, October.
    3. Angelos A. Antzoulatos, 1996. "Capital flows & current account deficits in the 1990s: why did Latin America & East Asian countries respond differently?," Research Paper 9610, Federal Reserve Bank of New York.
    4. John Muellbauer & Emilio Fernandez-Corugedo, 2004. "Consumer credit conditions in the UK," Money Macro and Finance (MMF) Research Group Conference 2003 70, Money Macro and Finance Research Group.
    5. Louzis, Dimitrios P. & Vouldis, Angelos T. & Metaxas, Vasilios L., 2012. "Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1012-1027.
    6. Emilio Fernandez-Corugedo, 2002. "Soft liquidity constraints and precautionary saving," Bank of England working papers 158, Bank of England.
    7. Antzoulatos, Angelos A., 1996. "Consumer credit and consumption forecasts," International Journal of Forecasting, Elsevier, vol. 12(4), pages 439-453, December.
    8. Emilio Fernandez-Corugedo & John Muellbauer, 2006. "Consumer credit conditions in the United Kingdom," Bank of England working papers 314, Bank of England.

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