Credit Crunch, Bank Lending and Monetary Policy: A Model of Financial Intermediation with Heterogeneous Projects

Mingwei Yuan () and Christian Zimmermann ()

No 89, Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal

Abstract: This paper studies a credit crunch in a dynamic general equilibrium model economy with numerous and heterogeneous investment projects. Banks provide loans to endogenously arising entrepreneurs and deposit to the rest of the population. The credit crunch is caused by conservative lending policies during periods of financial duress and reduced profitability. We find that monetary policy is largely ineffective in alleviating the credit crunch, while loan regulation can erase it.

Ce papier étudie un rationnement du crédit dans un modèle d'équilibre général dynamique avec des projets d'investissement nombreux et hétérogènes. Les banques offrent des services de crédit á des ménages qui décident de devenir des entrepreneurs et des services de dépôt au reste de la population. Le rationnement est causé par des politiques de prêt conservatrices pendant les périodes de contraintes financières et de profitabilité réduite. Nous trouvons que la politique monétaire ne peut résorber le rationnement, alors que la réglementation du crédit y parvient.

Keywords: Credit crunch; Basle accord; heterogeneous agents; bank regulation (search for similar items in EconPapers)
JEL-codes: E44 E22 G28 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mon
Date: 1999-07
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