Creator: Smith, Bruce D. (Bruce David), 1954-2002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 202 Abstract:
A model of credit rationing based on asymmetrically informed borrowers and lenders is developed. In this context, sufficient conditions are derived for an appropriate government policy response to credit rationing to be a continuously open discount window. It is also demonstrated that such a policy can be deflationary, and that given a commitment to operate in this way, the monopoly issue of liabilities can Pareto dominate their competitive issuance.
关键词: Federal lending, Assymetric information, Credit limit, Jaffee-Russel model, and Government loans 学科: D82 - Asymmetric and Private Information; Mechanism Design, E51 - Money Supply; Credit; Money Multipliers, and H81 - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
Creator: Greenwood, Jeremy, 1953- and Jovanovic, Boyan, 1951- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 446 Abstract:
A paradigm is presented where both the extent of financial intermediation and the rate of economic growth are endogenously determined. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement costly financial structures. Thus, financial intermediation and economic growth are inextricably linked in accord with the Goldsmith-McKinnon-Shaw view on economic development. The model also generates a development cycle reminiscent of the Kuznets hypothesis. In particular, in the transition from a primitive slow-growing economy to a developed fast-growing one, a nation passes through a stage where the distribution of wealth across the rich and poor widens.
关键词: Kuznets curve, Rate of return, Income gap, Income distribution, Growth rate, and Financial intermediation 学科: G00 - Financial Economics: General and O11 - Macroeconomic Analyses of Economic Development
Creator: Cole, Harold Linh, 1957- and Kehoe, Patrick J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 580 Abstract:
Some economists argue that as long as governments can earn the market rate of return by saving abroad, standard reputation models cannot support debt. We argue that these standard reputation models are partial in the sense that actions of agents in one arena affect reputation in that arena only. We develop a general model of reputation in which if a government is viewed as untrustworthy in one relationship, this government will be viewed as untrustworthy in other relationships. We show that our general model of reputation can support large amounts of debt.
Creator: Cole, Harold Linh, 1957-, Dow, James, 1961-, and English, William B. (William Berkeley), 1960- Series: International perspectives on debt, growth, and business cycles Abstract:
We consider a model of international sovereign debt where repayment is enforced because defaulting nations lose their reputation and consequently, are excluded from international capital markets. Underlying the analysis of reputation is the hypothesis that borrowing countries have different, unobservable, attitudes towards the future. Some regimes are relatively myopic, while others are willing to make sacrifices to preserve their access to debt markets. Nations' preferences, while unobservable, are not fixed but evolve over time according to a Markov process. We make two main points. First we argue that in models of sovereign debt the length of the punishment interval that follows a default should be based on economic factors rather than being chosen arbitrarily. In our model, the length of the most natural punishment interval depends primarily on the preference parameters. Second, we point out that there is a more direct way for governments to regain their reputation. By offering to partially repay loans in default, a government can signal its reliability. This type of signaling can cause punishment interval equilibria to break down. We examine the historical record on lending resumption to argue that in almost all cases, some kind of partial repayment was made.
学科: H63 - National budget, deficit, and debt - Debt ; Debt management and F34 - International finance - International lending and debt problems
Creator: Bordo, Michael D., Rappoport, Peter, and Schwartz, Anna J. (Anna Jacobson), 1915-2012 Series: Monetary theory and financial intermediation Abstract:
In this paper we examine the evidence for two competing views of how monetary and financial disturbances influenced the real economy during the national banking era, 1880-1914. According to the monetarist view, monetary disturbances affected the real economy through changes on the liability side of the banking system's balance sheet independent of the composition of bank portfolios. According to the credit rationing view, equilibrium credit rationing in a world of asymmetric information can explain short-run fluctuations in real output. Using structural VARs we incorporate monetary variables in credit models and credit variables in monetarist models, with inconclusive results. To resolve this ambiguity, we invoke the institutional features of the national banking era. Most of the variation in bank loans is accounted for by loans secured by stock, which in turn reflect volatility in the stock market. When account is taken of the stock market, the influence of credit in the VAR model is greatly reduced, while the influence of money remains robust. The breakdown of the composition of bank loans into stock market loans (traded in open asset markets) and other business loans (a possible setting for credit rationing) reveals that other business loans remained remarkably stable over the business cycle.
学科: N21 - Economic History: Financial Markets and Institutions: U.S.; Canada: Pre-1913 and N11 - Macroeconomics and monetary economics ; Growth and fluctuations - United States ; Canada : Pre-1913
Creator: Cole, Harold Linh, 1957- and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 209 Abstract:
A traditional explanation for why sovereign governments repay debts is that they want to keep good reputations so they can easily borrow more. Bulow and Rogoff show that this argument is invalid under two conditions: (i) there is a single debt relationship, and (ii) regardless of their past actions, governments can earn the (possibly state-contingent) market rate of return by saving abroad. Bulow and Rogoff conjecture that, even under condition (ii), in more general reputation models with multiple relationships and spillover across them, reputation may support debt. This paper shows what is needed for this conjecture to be true.
关键词: Borrowing and lending, Reputation, Default , Lending crises, and Sovereign Debt 学科: F34 - International Lending and Debt Problems, E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination, and F00 - International Economics: General