English, Article, Journal or magazine article edition: Collateral, Rationing, and Government Intervention in Credit Markets William G. Gale

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Bookmark: http://trove.nla.gov.au/version/139964
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Collateral, Rationing, and Government Intervention in Credit Markets
Author
  • William G. Gale
Physical Description
  • preprint
Notes
  • RePEc:nbr:nberwo:3083
  • RePEc:cla:uclawp:554
  • This paper analyzes the effects of government intervention in credit markets when lenders use collateral, interest, and the probability of granting a loan as potential screening devices. Equilibria with and without rationing are examined. The principal theme is that credit policies operate through their effect on the incentive compatibility constraint, which inhibits high-risk borrowers from mimicking the behavior of low-risk borrowers. Any policy that loosens (tightens) the constraint raises (reduces) efficiency. Most government credit programs explicitly attempt to fund investors that cannot obtain private financing. In the model presented here, these subsidies increase the extent of rationing and reduce efficiency. In contrast, policies that subsidize the nonrationed borrowers, or all borrowers, are efficiency enhancing, and reduce the extent of rationing.
  • RePEc:nbr:nberwo:3024
Language
  • English
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