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Bruce D Smith - One of the best experts on this subject based on the ideXlab platform.

  • monetary policy and government Credit programs
    Journal of Financial Intermediation, 2002
    Co-Authors: Marco A Espinosavega, Bruce D Smith
    Abstract:

    Abstract Credit Rationing is a common feature of most developing economies. In response to it, the governments of these countries often operate a number of programs intended to expand the supply of Credit to the private sector. Expansionary monetary policy is often seen as a way of reducing the extent of Credit Rationing. We examine the consequences of a common policy tool in these economies: the use of expansionary monetary policy combined with direct central bank lending to inject Credit. In the context of a small open economy we show that such a policy increases long-run production if and only if the economy is in a development trap. Moreover government Credit programs often lead to endogenously arising aggregate volatility. Thus the case for government intervention in Credit markets relies largely on the notion that output is artificially low because the economy is in a development trap. However, it is the case that the kind of policy we consider can be used to eliminate certain indeterminacies of equilibrium created by endogenous Credit market frictions. Journal of Economic Literature Classification Numbers: E44, O16, O42.

  • financial market frictions monetary policy and capital accumulation in a small open economy
    Journal of Economic Theory, 1998
    Co-Authors: Elisabeth Huybens, Bruce D Smith
    Abstract:

    Abstract We consider a small open economy with a costly state verification problem and binding reserve requirements. The presence of these frictions leads to the existence of two steady states with Credit Rationing. An increase in the money growth rate, the world interest rate or reserve requirements raises (lowers) GDP in the high (low) activity steady state. However, sufficiently large increases in money growth or the world interest rate can transform the high activity steady state from a sink to a source. The model also delivers prescriptions for restoring the stability of this steady state in such an eventuality.Journal of Economic LiteratureClassification Numbers: E5, F4.

  • financial intermediation and regime switching in business cycles
    The American Economic Review, 1998
    Co-Authors: Costas Azariadis, Bruce D Smith
    Abstract:

    The authors study a one-sector growth model where capital investment is Credit financed and there is an adverse selection problem in Credit markets. The presence of adverse selection creates an indeterminacy of equilibrium. Many equilibria display permanent fluctuations characterized by transitions between Walrasian regimes and regimes of Credit Rationing. Cyclical contractions involve declines in real interest rates, increases in Credit Rationing, and withdrawals of savings from banks. For some configurations of parameters, all equilibria display cyclical fluctuations. The authors provide sufficient conditions for deterministic cycles consisting of m periods of expansion followed by n periods of contraction to exist. Copyright 1998 by American Economic Association.

  • intermediation and the equilibrium allocation of investment capital implications for economic development
    Journal of Monetary Economics, 1992
    Co-Authors: Bruce D Smith, John H Boyd
    Abstract:

    Abstract We investigate several common assertions about intermediation and how it affects the allocation of investment capital. We use a model with adverse selection and costly state verification in which both debt contracts and Credit Rationing are observed. Intermediaries arise due to a comparative advantage in information acquisition. Relative to the situation absent intermediation, intermediaries reduce Credit Rationing and (inefficient) interest rate differentials. The model also shows how large interest rate differentials can be observed when financial markets are not integrated and how the volume of intermediation is affected by changes in the environment.

John Giles - One of the best experts on this subject based on the ideXlab platform.

  • competition under Credit Rationing theory and evidence from rural china
    Social Science Research Network, 2003
    Co-Authors: Albert Park, Loren Brandt, John Giles
    Abstract:

    We present a duopoly model of financial competition to describe the conditions under which competition leads to greater bank effort when repressed financial systems ration Credit. The model features an entrant that freely sets its interest rate, and an incumbent that must charge a rate below that which is market clearing. Both players may exert costly effort to inform themselves about borrower types. Using data on rural financial institutions in China, we test empirically the effects of competition on deposit growth, loan portfolio composition, repayment rates, and other effort measures, finding positive effects of competition on effort and financial performance.

Gregory F. Udell - One of the best experts on this subject based on the ideXlab platform.

  • bank market power and sme financing constraints
    Review of Finance, 2009
    Co-Authors: Santiago Carbovalverde, Francisco Rodriguezfernandez, Gregory F. Udell
    Abstract:

    Some studies find that market power is associated with Credit availability (information hypothesis); others find that less competitive banking markets lead to more Credit Rationing (market power hypothesis). Empirical research has relied solely on concentration as a measure of market power. The industrial organization literature, however, argues that a structural competition indicator such as the Lerner index is a superior measure. We test the information hypothesis and the market power hypothesis using these two alternative measures of market power and find that they generally give conflicting results. However, we also offer evidence suggesting that both views can be reconciled. Copyright 2009, Oxford University Press.

  • Bank market power and SME financing constraints
    Review of Finance, 2009
    Co-Authors: Santiago Carb-valverde, Francisco Rodrguez-fernndez, Gregory F. Udell
    Abstract:

    Some studies find that higher bank concentration is associated with higher Credit availability (information hypothesis) while others maintain that Credit Rationing is higher in less competitive bank markets (market power hypothesis). This study tests these two competing hypotheses by employing for the first time a competition indicator from the Industrial Organization literature - the Lerner index - as an alternative to concentration measures. The results are sensitive to the choice of market power indicators. The Lerner index is found to be the more consistent indicator and exhibit the larger (and positive) marginal effect on the probability that a firm is financially constrained.

Albert Park - One of the best experts on this subject based on the ideXlab platform.

  • competition under Credit Rationing theory and evidence from rural china
    Social Science Research Network, 2003
    Co-Authors: Albert Park, Loren Brandt, John Giles
    Abstract:

    We present a duopoly model of financial competition to describe the conditions under which competition leads to greater bank effort when repressed financial systems ration Credit. The model features an entrant that freely sets its interest rate, and an incumbent that must charge a rate below that which is market clearing. Both players may exert costly effort to inform themselves about borrower types. Using data on rural financial institutions in China, we test empirically the effects of competition on deposit growth, loan portfolio composition, repayment rates, and other effort measures, finding positive effects of competition on effort and financial performance.

Sugata Marjit - One of the best experts on this subject based on the ideXlab platform.

  • asset level heterogeneity competition and export incentives the role of Credit Rationing
    2020
    Co-Authors: Sugata Marjit, Moushakhi Ray
    Abstract:

    Firm heterogeneity is mostly discussed in the literature from the viewpoint of productivity differential. In contrast this paper recognizes wealth heterogeneity as an important factor that results in firm heterogeneity. The issue of wealth heterogeneity and export incentive through Credit market imperfection over the life cycle of a firm remains largely unaddressed in the literature. This paper studies the dynamics of wealth heterogeneity and export incentive of Credit rationed firms through asset building. The theoretical and empirical results indicate that an increase in the initial level of competition implies greater export incentive. However, over the life cycle of a firm, the role of competition is impacted by the intensity of capital accumulation and the initial level of wealth. Greater local competition before the entry of firms in the export market hurts export incentive by limiting cash flows and asset build up. Thus low profits due to competition allows firms to look for export opportunities but lower cash flows hurt such incentives.

  • A Service of zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics Sustainabnility of Product Market Collusion under Credit Market Imperfections Sustainability of Product Market Collusion under Credit Market Imperfections Sus
    2020
    Co-Authors: Sugata Marjit, Arijit Mukherjee, Lei Yang
    Abstract:

    Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Sustainability of Product Market Collusion under Credit Market Imperfections Abstract We study the implications of Credit constraints for the sustainability of product market collusion in a bank-financed oligopoly in which firms face an imperfect Credit market. We consider two situations, without and with Credit Rationing, i.e., with a binding Credit limit. When there is Credit Rationing, a moderately higher cost of external financing may affect the degree of collusion, but a substantial increase keeps it unaffected relative to the no-constraint case. A permanent adverse demand shock in this setup does not affect the possibility of collusion, but may aggravate financing constraints and eventually lead to collusion. We consider both Cournot and Bertrand models, and the results are qualitatively the same. JEL-Codes: D210, D430, G210

  • inequality structure of production and international trade the role of Credit market imperfection
    2017
    Co-Authors: Hamid Beladi, Sugata Marjit, Suryaprakash Misra
    Abstract:

    Credit Rationing in the presence of asset inequality affects production and trade pattern in this paper, but not in the conventional way. A Ricardian general equilibrium framework with heterogeneous levels of asset ownership is developed to show that more equal asset distribution may contract the output of the Credit intensive sector as redistribution to the bottom of the ladder fails to promote entrepreneurs. However, the same in favor of the middle of the ladder may do the opposite. We point out the possibility that an economy with relatively equal distribution of asset ownership may import capital or Credit intensive good and also export capital, unlike in a conventional HOS model.

  • on the sustainability of product market collusion under Credit market imperfection
    MPRA Paper, 2016
    Co-Authors: Sugata Marjit, Arijit Mukherjee, Lei Yang
    Abstract:

    We study the implication of Credit constraints for the sustainability of product market collusion in a bank financed Cournot duopoly when firms face an imperfect Credit market. We consider two situations without or with Credit Rationing. When there is no Credit Rationing moderately higher cost of external finance may affect the degree of collusion, but a substantial increase keeps it unaffected. Permanent adverse demand shock in this set up does not affect the possibility of collusion, but may aggravate the finance constraint and eventually lead to collusion. We also discuss the case with Credit Rationing.