Collateral, Credit Rationing and the Real Effects of Monetary Policy

Swiss Journal of Economics and Statistics

12 Pages Posted: 29 Sep 2009

See all articles by Raju Singh

Raju Singh

International Monetary Fund (IMF)

Date Written: 1996

Abstract

This paper tries to improve the identification of firms whose access to bank credit would be threatened by a tightening of monetary policy. It extends a simple competitive credit rationing model with limited collateral by introducing a central bank financing facility. The effects of monetary policy are then examined. Besides the standard interest rate effect, the study shows that a tighter monetary policy would reduce bank lending to entrepreneurs endowed with low-risk projects and limited net wealth. In addition, the economy would become more volatile.

Keywords: Monetary policy, credit rationing, imperfect information

JEL Classification: E50, G21

Suggested Citation

Singh, Raju, Collateral, Credit Rationing and the Real Effects of Monetary Policy (1996). Swiss Journal of Economics and Statistics, Available at SSRN: https://ssrn.com/abstract=1479855

Raju Singh (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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