By Marco Mazzoli
This e-book relates the literatures of finance, commercial economics and funding to the theoretical framework of the "credit view." First, banks' judgements relating their resources are visible as not less than as appropriate as their judgements referring to their liabilities. moment, securities and financial institution credits are hugely imperfect substitutes. The interactions among genuine and fiscal sectors are analyzed from the perspective of the economic enterprise, in a version the place the funding and fiscal judgements of the enterprise are taken concurrently.
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Additional resources for Credit, Investments and the Macroeconomy: A Few Open Issues
However credit rationing is a major and very influential result of the literature on financial markets imperfections. It can be derived from the same sources of market imperfections explaining the existence of banking and financial intermediation. Furthermore, it is one of the most rigorous explanations (to others with equity rationing) of how financial markets imperfections affect the macroeconomy. For these reasons it constitutes the object of the next section, although it is not strictly related to the credit view.
This, in particular, will be done in chapter 4. 13 12 At that time, according to United States regulations, even certificates of deposits were 13 subject to reserve requirements. In this regard, see also Bertocco (1987, 1989). 34 Banks, credit and the macroeconomy The particular branch of the New-Keynesian macroeconomics concerned with the propagation of financial shocks to the real sectors has been denominated the 'excess sensitivity', 'financial propagation' or 'financial accelerator' literature (Greenwald and Stiglitz, 1988, 1990b, 1993a; Bernanke and Gertler, 1989, 1990; Calomiris and Hubbard, 1990; Gertler, 1992).
In Stiglitz and Weiss' (1981) adverse selection model the firm's return is a random variable and the concept of mean-preserving spread plays a very important role: it means that the distributions of the project returns differ from one another in terms of their variance only, and have a common mean. 1) The riskier projects will be characterized by a lower pr The banking sector is assumed to be perfectly competitive, both banks and borrowers are risk neutral. The banks do not know the probability of success and the value of the /th borrower's project if successful, but they know the characteristics of the borrowers' population.