We use robust control to study how a central bank in an economy with imperfect interest rate pass-through conducts monetary policy if it fears that its model could be misspecified. The effects of the central bank’s concern for robustness can be summarised as follows. First, depending on the shock, robust optimal monetary policy under commitment responds either more cautiously or more aggressive...

We study a model of interbank credit where physical and informational frictions limit the opportunities for intertemporal trade among banks and outside investors. Banks obtain loans in an over-the-counter market (involving search, bilateral matching, and negotiations over the terms of the loan) and hold assets of heterogeneous quality that in turn determine their ability to repay those loans. W...

Studies of bank diversification, as well as Basel II regulatory framework, use indirect methods of characterizing the sources of diversification in bank portfolios. The present paper more directly estimates the sources of diversification in thirteen retail credit categories from asset-backed security performance measures that are highly correlated with (unobservable) loan value. Classical Marko...

We develop a model of insider lending in which a borrower can give incentives to a bank manager to misuse his right of control by extending a loan at favorable rates to the borrower at the expense of the equity value of the bank. The model explains why insider loans are often made to borrowing firms that are also large shareholders of the bank. Although in principal every borrower could bribe t...

This paper studies whether banks charge higher or lower interest rates on loans to firms with overconfident CEOs. It establishes a theoretical model to show the relationship between the loan rate and overconfidence of the borrowing firm’s CEO. It also conducts empirical analyses to test the predictions of the model. As predicted in the model, firms with overconfident CEOs enjoy lower loan rates...

one of the main challenges facing the agriculture bank of iran regarding lending loans is the high probability of default by farmers. several factors could be involved in this issue and should be considered in order to control and reduce the risk in the failure of repayment. this study aimed to examine the factors affecting the repayment performance of agricultural loans in the city of maragheh...

This paper deals with how to settle a foreign currency exchange rate indexed mortgage loan between bank and consumer if the court declares that agreement has an abusive clause. At present, many consumers in Poland strive void their contracts on grounds they contain indexation clause, mainly referred CHF/PLN rate. The calculations are based CHF 30 years decreasing monthly installments, starting ...

Abstract In the Egyptian–Greek legal practice “fictitious loan agreements” are known as specific constructions of deferred purchase contracts ancient practice. While Roman law is well from its consensual contracts, such sales contract ( emptio venditio ), furthermore it acknowledged with payment valid sale, Greek always adhered to prompt sale and besides this, only additional solutions were app...

This paper provides an empirical analysis of joint-liability micro-lending contracts. Using our data set from Constanta (a Georgian micro-lender), we examine the efficacy of various incentives set by this contract such as joint-liability between groups of borrowers or group access to future and to larger loans. As proposed by theory, we find that joint liability induces a group formation where ...

Small and Medium Enterprise (SMEs) are the backbone of all economies and a key source of economic growth. The important contribution of SMEs in Malaysia’s economy, employment and industrialization has been well documented. Although their role in the economy is substantial, many SMEs are facing difficulties to access to financing, human capital, technology and market. Given that there are an iss...