Saving Eliminates Credit Rationing

David Webb () and David de Meza

FMG Discussion Papers from Financial Markets Group

Abstract: Equilibrium credit rationing, in the sense of Stiglitz and Weiss (1981), implies the borrower faces an infinite marginal cost of funds. Infinitessimily delaying the project to accumulate more wealth is therefore advantageous to the borrower. As a result, the well-known conditions for credit rationing cannot be satisfied.

Date: 2001-09

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