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Saving eliminates credit rationing

Author

Listed:
  • de Meza, David
  • Webb, David C.

Abstract

Equilibrium credit rationing, in the sense of Stiglitz and Weiss (1981), implies the borrower faces an infinite marginal cost of funds. Infinitessimily delaying the project to accumulate more wealth is therefore advantageous to the borrower. As a result, the well-known conditions for credit rationing cannot be satisfied.

Suggested Citation

  • de Meza, David & Webb, David C., 2001. "Saving eliminates credit rationing," LSE Research Online Documents on Economics 25067, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:25067
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    File URL: http://eprints.lse.ac.uk/25067/
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    References listed on IDEAS

    as
    1. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1994. "Entrepreneurial Decisions and Liquidity Constraints," RAND Journal of Economics, The RAND Corporation, pages 334-347.
    2. David de Meza & David C. Webb, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 281-292.
    3. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • J1 - Labor and Demographic Economics - - Demographic Economics

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