On the Possibility of Credit Rationing in the Stiglitz-Weiss Model

Lutz Georg Arnold ()

No 403, Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft from University of Regensburg, Department of Economics

Abstract: Contrary to what is consistently assumed in the literature, the return function cannot be hump-shaped in the Stiglitz-Weiss (1981) model. This has important consequences for the possible occurrence of credit rationing and redlining. With a single class of borrowers, banks offer credit in two stages. Demand possibly exceeds supply in stage one, but not in stage two. With several observationally distinguishable borrower classes, the firms in a borrower class are redlined only under circumstances which imply that they would not get credit in a perfect capital market either.

Keywords: credit rationing; asymmetric information; Kreditrestriktion; Asymmetrische Information (search for similar items in EconPapers)
JEL-codes: G21 E51 D82 (search for similar items in EconPapers)
Date: 2005-03-01
Note: This paper is part of http://www.opus-bayern.de/uni-regensburg/schriftenreihen_ebene2.php?sr_id=3

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