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Effects of credit limit on efficiency and welfare in a simple general equilibrium model

Author

Listed:
  • Ngoc‐Sang Pham

    (EM Normandie - École de Management de Normandie = EM Normandie Business School)

  • Hien Pham

    (University of Rochester [USA])

Abstract

We consider a simple general equilibrium model with two agents under the presence of financial market imperfections. Agents can borrow to realize their productive project up to the level of debt whose repayment reaches a fraction of the project's value (the so‐called credit limit ). After characterizing the whole set of equilibria, we investigate the connection between credit limit, (individual and social) welfare, and efficiency. We also compute the optimal credit limit which maximizes the social welfare function.

Suggested Citation

  • Ngoc‐Sang Pham & Hien Pham, 2019. "Effects of credit limit on efficiency and welfare in a simple general equilibrium model," Post-Print hal-05498312, HAL.
    • Handle: RePEc:hal:journl:hal-05498312
    DOI: 10.1111/ijet.12245
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    Cited by:

    1. is not listed on IDEAS
    2. Ngoc-Sang Pham, 2023. "Some Lectures on Macroeconomics," Working Papers hal-04366349, HAL.
    3. Ngoc-Sang Pham, 2022. "Impacts of (individual and aggregate) productivity and credit shocks on equilibrium aggregate production," Working Papers halshs-03686284, HAL.
    4. Ngoc-Sang Pham, 2025. "(Non-Monotonic) Effects of Productivity and Credit Constraints on Equilibrium Aggregate Production in General Equilibrium Models with Heterogeneous Producers," Papers 2501.12700, arXiv.org, revised Sep 2025.
    5. Pham, Ngoc-Sang, 2018. "Credit limits and heterogeneity in general equilibrium models with a finite number of agents," MPRA Paper 88736, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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