Macro-Economic Equilibrium and Credit Rationing

57 Pages Posted: 9 Jun 2004

See all articles by Andrew Weiss

Andrew Weiss

Boston University - Department of Economics; National Bureau of Economic Research (NBER)

andrew murray weiss

affiliation not provided to SSRN

Date Written: February 1987

Abstract

In this paper we investigate the macro-economic equilibria of an economy in which credit contracts have both adverse selection and incentive effects. The terms of credit contracts include both an interest rate and a collateral requirement. We show that in this richer model all types of borrowers may be rationed. Interest rates charged borrowers may move either pro or counter-cyclically. If pro-cyclical shocks have a greater effect on the success probabilities of risky techniques than on safe ones, then the interest rate offered depositors may also move counter-cyclically. Finally, we show that the impact of monetary policy on the macro-economic equilibrium is affected by whether or not the economy is in a regime in which credit is rationed.

Suggested Citation

Weiss, Andrew M. and weiss, andrew murray, Macro-Economic Equilibrium and Credit Rationing (February 1987). NBER Working Paper No. w2164. Available at SSRN: https://ssrn.com/abstract=227383

Andrew M. Weiss

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-3086 (Phone)
617-353-1188 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrew murray Weiss

affiliation not provided to SSRN

Register to save articles to
your library

Register

Paper statistics

Downloads
57
Abstract Views
730
rank
374,400
PlumX Metrics