Limited Information, Credit Rationing, and Optimal Government Lending Policy Public Deposited

Creator Series Issue number
  • 202
Date Created
  • 1982-10
  • 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.

Subject (JEL) Mot-clé Date Modified
  • 07/11/2019
Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
  • Federal Reserve Bank of Minneapolis
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