Adverse selection and the financial accelerator ¬リニ
نویسنده
چکیده
Many economists believe that credit market distortions create a financial accelerator which destabilizes the economy. This paper shows that when credit market distortions arise from adverse selection they sometimes stabilize the economy rather than destabilize it. The stabilizing forces are closely related to forces that cause overinvestment in static models. When investment projects are equity financed, or when contracts are written optimally, the distortions always stabilize the economy. Thus, stabilizing equilibria are a robust feature of the model. The empirical distinction between accelerator and stabilizer equilibria is subtle. Many empirical tests are unable to distinguish between accelerator and stabilizer equilibria. r 2006 Elsevier B.V. All rights reserved. JEL classification: E22; E32; E44; G14
منابع مشابه
Adverse Selection and the Accelerator
This paper reexamines the relationship between financial market imperfections and economic instability. I present a model in which financial accelerator effects come from adverse selection in credit markets. Unlike other models of the financial accelerator, the model I present has the potential to stabilize the economy rather than destabilize it. The stabilizing forces in the dynamic model are ...
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