Credit Stagnation in Latin America Adolfo Barajas, IMF Institute Roberto Steiner, Universidad de los Andes, Bogotá, Colombia This study examines a troubling phenomenon occurring in several Latin American economies in the last few years: a marked slowdown in bank credit to the private sector. Since the late 1980s, the “credit channel” literature has made a case that fluctuations in bank credit m...

This paper studies under which conditions the share of profit in value added, financial constraints on investment and capital shortage may foster unemployment and may limit the growth of capital and/or the growth of aggregate demand, in a stock-flow consistent model. The efficiency of demand side versus supply side economic policies (decrease of the real interest rate and/or of the real wage, i...

We develop a macroeconomic model with adverse selection. A continuum of households purchase goods from a continuum of anonymous producers. The quality of products can only be learned after trade. Adverse selection arises as low-quality goods deliver higher profits for producers but are less desirable for households. Higher aggregate demand induces more high-quality goods, raises average quality...

This paper builds models of nonlinear dynamics in the aggregate investment and borrower net worth and uses them to study the causes and nature of endogenous credit cycles. The basic model has two types of projects: the Good and the Bad. The Bad is highly productive, but, unlike the Good, it generates less aggregate demand spillovers and contributes little to improve borrower net worth. Furtherm...

a r t i c l e i n f o JEL classification: D42 F21 F22 O17 Keywords: Informal credit Formal credit Moneylender Foreign capital Emigration General equilibrium This paper makes an attempt to provide a theory of determination of interest rate in the informal credit market in a less developed economy in terms of a three-sector static deterministic general equilibrium model. There are two informal se...

In most inventory models it is assumed that the parameters of the model do not vary with time, and that the payment of orders from the retailer to the supplier is made immediately up on the receipt of these orders. Some suppliers, however, allow a certain fixed period to settle payment accounts. During this fixed period no interest is charged by the supplier, but beyond that period an interest,...

This paper identifies the effect of financing constraints on firms’ labor demand. We exploit exogenous funding shocks to German savings banks during the US mortgage crisis that are unrelated to local conditions. We find that firms with credit relationships with affected banks experienced a significant decline in employment and in labor compensation relative to firms whose credit relationships w...

This paper models a developing nation that faces a foreign exchange shortage and hence its demand for foreign goods is limited both by its income and its foreign exchange balance. Availability of international credit relaxes the second constraint. It is shown that in this setting the availability of intemational credit at concessionary rates can leave the borrowing nation worse off than if it h...

We study an economy where agents are heterogeneous in terms of observable wealth and unobservable talent. Adverse selection forces creditors to ask for collateral. We study the two-way interaction between rationing in the credit market and the wages offered in the labor market. Both pooling and separating credit contracts can be offered in equilibrium. The minimum wealth needed to obtain a sepa...