The Allocation of Credit and Financial Collapse
This paper examines the allocation of credit in a market in which borrowers have greater information concerning their own riskiness than do lenders. It illustrates (1) the allocation of credit is inefficientand at times can be improved by government intervention, and (2) small changes in the exogenous risk-free interest rate can cause large (discontinuous) changes in the allocation of credit and the efficiency of the market equilibrium.These conclusions suggest a role for government as the lender of last resort.
|Date of creation:||Jan 1986|
|Publication status:||published as Mankiw, N. Gregory."The Allocation of Credit and Financial Collapse," Quarterly Journal of Economics, Vol. 101, No. 3, (August 1986), pp. 455-470.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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- Alan S. Blinder & Joseph E. Stiglitz, 1983.
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NBER Working Papers
1084, National Bureau of Economic Research, Inc.
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- Ben S. Bernanke, 1983.
"Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression,"
NBER Working Papers
1054, National Bureau of Economic Research, Inc.
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- 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.
- Ordover, Janusz & Weiss, Andrew, 1981. "Information and the Law: Evaluating Legal Restrictions on Competitive Contracts," American Economic Review, American Economic Association, vol. 71(2), pages 399-404, May.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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