This paper studies the risk-return profile of centralized and decentralized banks. We address the conditions that favor a particular lending regime while acknowledging the effects on lending and returns caused by the course of the business cycle. To analyze these issues, we develop a model which incorporates two stylized facts; (i) banks in which lending decisions are decentralized tend to have...

This document describes the techniques used in and results of our project to apply social and information network analysis to the Kiva.org online microlending network. The Kiva network can be modeled as a set of bipartite graphs linking lenders to loans, lending teams to loans, and individual lenders to lending teams. Folding the lender-loan graph to create a graph of lenders linked by common l...

Interest rate based tests and savings-investment correlations disagree on the extent of capital mobility in Pacific Rim economies. The apparent success of several East Asian countries in sterilizing capital inflows has also fueled the controversy. This paper argues that previous studies examining money market rates may be misplacing their focus, since most lending is mediated through (sometimes...

While the concept of customer lending relationships in banking has generated a great deal of recent attention, one gap in the empirical literature is that linking current lending business and the sale of “other products”. Specifically, does establishing a lending relationship today add value for the bank by increasing the probability of attracting future business from the same customer? Indeed,...

We study the e¤ects of securitization on interbank lending competition when banks see private signals of local applicants’ repayment chances. If banks cannot securitize, the outcome is e¢ cient: they lend to their most creditworthy local applicants. With securitization, banks lend also to remote applicants with strong observables in order to lessen the lemons problem they face in selling their ...

This paper develops a theory in which shocks to the effi ciency of information acquisition by financial intermediation translate into business cycle fluctuations via capital reallocation. In our theory, under costly verification, the bank chooses to only monitor the returns of those entrepreneurs with insuffi cient net worth. This distorts the existing capital allocation among entrepreneurs of ...

Warren Buffett famously stated two rules for investing: Rule #1. Never lose money, and Rule #2. Never forget Rule #1. Recent Peer Lending opportunities provide the individual investor to earn an interest rate significantly higher than that of a savings account. However, a default on the loan by the borrower means the investor will lose her entire principal. In this paper, we will use Machine Le...

We analyze optimal monetary policy in a sticky price model where the central bank supplies money outright via asset purchases and lends money temporarily against collateral. The terms of central bank lending a¤ect rationing of money and impact on macroeconomic aggregates. The central bank can set the policy rate and its in‡ation target in a way that implements the …rst best long-run allocation,...

Over the past decade, there has been a significant increase in the phenomenon known as ”predatory lending.” In a forthcoming paper, we argue that predatory lending emerged when market incentives that historically led lenders to engage in credit rationing gave way to a market where lenders could easily exploit unsophisticated borrowers. Our specific focus is on the home loan market, i.e., closed...

This paper studies P2P lending and the factors explaining loan default. This is an important issue because in P2P lending individual investors bear the credit risk, instead of financial institutions, which are experts in dealing with this risk. P2P lenders suffer a severe problem of information asymmetry, because they are at a disadvantage facing the borrower. For this reason, P2P lending sites...