Credit Crunch in a Model of Financial Intermediation and Occupational Choice

Posted: 18 Nov 2009

See all articles by Christian Zimmermann

Christian Zimmermann

affiliation not provided to SSRN

Mingwei Yuan

affiliation not provided to SSRN

Date Written: 2004

Abstract

A dynamic general equilibrium model of financial intermediation and occupational choice is proposed based on empirical regularities, in order to study supply-side credit crunches and possible policy solutions. Asset accumulation by households as they face various employment and return risks over a lifetime determines whether they are entrepreneurs or workers. Modeling bank lending practices is essential in understanding credit crunches and solutions. The innovative model presented takes into account savings decisions of households and allows them to choose whether to become entrepreneurs. The model is used to determine the appropriate monetary and regulatory responses to a credit crunch. The model is applied to the Canadian economy and used to generate a credit crunch state and analyze policy and regulatory implications. The Canadian example showsthat monetary policy is largely ineffective in lessening the credit crunch, but flexible loan regulations can eliminate it.(TNM)

Keywords: Public policies, Self-employment, Bank loans, Career choices, Credit, Lending policies, Monetary policies, Banking laws

Suggested Citation

Zimmermann, Christian and Yuan, Mingwei, Credit Crunch in a Model of Financial Intermediation and Occupational Choice (2004). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1508244

Christian Zimmermann (Contact Author)

affiliation not provided to SSRN

Mingwei Yuan

affiliation not provided to SSRN

No Address Available

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
267
PlumX Metrics