Money and Credit in a Production Economy
In this paper we combine liquidity constrained lenders and borrowers in a market for investment projects that is characterized by incomplete information. The assumption of different probability distributions of the investment projects creates an adverse selection problem which gives rise to credit rationing in the loan market. Monetary policy has real effects, interacts with both the degree of liquidity and the degree of credit rationing, and alters the aggregate level of capital stock and its marginal productivity.
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- Bruce C. Greenwald & Joseph E. Stiglitz, 1993.
"Financial Market Imperfections and Business Cycles,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 108(1), pages 77-114.
- Bruce C. Greenwald & Joseph E. Stiglitz, 1988. "Financial Market Imperfections and Business Cycles," NBER Working Papers 2494, National Bureau of Economic Research, Inc.
- Bencivenga, Valerie R. & Smith, Bruce D., 1993.
"Some consequences of credit rationing in an endogenous growth model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 17(1-2), pages 97-122.
- Bencivenga, V.R. & Smith, B.D., 1988. "Some Consequences Of Credit Rationing In An Endogenous Growth Model," RCER Working Papers 159, University of Rochester - Center for Economic Research (RCER).
- Azariadis Costas & Smith Bruce D., 1993. "Adverse Selection in the Overlapping Generations Model: The Case of Pure Exchange," Journal of Economic Theory, Elsevier, vol. 60(2), pages 277-305, August.
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