Do Informational Frictions Justify Federal Credit Programs?
Two credit market models with private information are used here to evaluate the effectiveness of government credit programs. In a model with costly state verification, direct government lending and government loan guarantees at best have no effect, and at worst make all agents worse off by increasing (decreasing) interest rates faced by borrowers (lenders) and increasing the amount of rationing in the loan market. In an adverse selection model with costly screening of borrowers, government lending influences credit allocation by affecting borrowers' incentives to misreport type. Government programs to encourage secondary markets in private loans are welfare improving only when there are regulations which inhibit diversification by private financial intermediaries. Copyright 1994 by Ohio State University Press.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 26 (1994)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879|
When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:26:y:1994:i:3:p:523-44. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.