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Saving eliminates credit rationing

By David de Meza and David C. Webb

Abstract

Equilibrium credit rationing, in the sense of Stiglitz and Weiss (1981), implies the borrower faces an infinite marginal cost of funds. Infinitessimily delaying the project to accumulate more wealth is therefore advantageous to the borrower. As a result, the well-known conditions for credit rationing cannot be satisfied

Topics: HG Finance, HB Economic Theory
Publisher: Financial Markets Group, London School of Economics and Political Science
Year: 2001
OAI identifier: oai:eprints.lse.ac.uk:25067
Provided by: LSE Research Online

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Citations

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  6. (1987). Too much investment: a problem of asymmetric information”, doi

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