In a simplified version of the Stiglitz–Weiss (1981) model of the credit market we characterize optimal policies to cor- rect market failures. Widely applied policies, notably interest–rate subsidies and investment subsidies, are compared to the theoretical optimum. Some comments on the trade-off between credit subsidy and infrastructural investment are added in the conclusions.
Minelli, E., Modica, S. (2009). CREDIT MARKET FAILURES AND POLICY. JOURNAL OF PUBLIC ECONOMIC THEORY, 2009-06.
CREDIT MARKET FAILURES AND POLICY
MODICA, Salvatore
2009-01-01
Abstract
In a simplified version of the Stiglitz–Weiss (1981) model of the credit market we characterize optimal policies to cor- rect market failures. Widely applied policies, notably interest–rate subsidies and investment subsidies, are compared to the theoretical optimum. Some comments on the trade-off between credit subsidy and infrastructural investment are added in the conclusions.
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