Components of Credit Rationing

33 Pages Posted: 11 Nov 2019

See all articles by Mehdi Beyhaghi

Mehdi Beyhaghi

Federal Reserve Banks - Federal Reserve Bank of Richmond

Fathali Firoozi

University of Texas at San Antonio - College of Business - Department of Economics

Abolhassan Jalilvand

Loyola University of Chicago

Date Written: July 1, 2019

Abstract

Existence and implications of credit rationing by lending institutions have been the subject of much research in recent decades. Although there are some empirical indications, there is no theoretical justification about how various forms of credit rationing manifest themselves in credit markets. This study offers a theoreti- cal decomposition of credit rationing within a model of equilibrium credit rationing that generalizes some of seminal models of equilibrium credit rationing. The study first theoretically establishes three distinct components of rationing, namely, low-type rationing, market-tightness rationing, and self-imposed rationing, and then exhibits empirical evidence on the magnitude of each of the three rationing components using a bi-annual survey data set on various forms of bank credit rationing collected by European Central Bank over the period 2009-2018.

Keywords: asymmetric information; credit risk; incentive compatibility; optimal contracts

JEL Classification: D82, G21, G32

Suggested Citation

Beyhaghi, Mehdi and Firoozi, Fathali and Jalilvand, Abolhassan, Components of Credit Rationing (July 1, 2019). Available at SSRN: https://ssrn.com/abstract=3478832 or http://dx.doi.org/10.2139/ssrn.3478832

Mehdi Beyhaghi

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Fathali Firoozi

University of Texas at San Antonio - College of Business - Department of Economics ( email )

6900 North Loop 1604 West
San Antonio, TX 78249
United States

Abolhassan Jalilvand (Contact Author)

Loyola University of Chicago ( email )

25 East Pearson Street
Chicago, IL 60611
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
5
Abstract Views
78
PlumX Metrics