 Credit rationing, interest rates and capital accumulationMahmoud Nabi and Osman Suliman Economic Modelling, 2011, vol. 28, issue 6, 2719-2729 Abstract: A simple endogenous growth model is developed to characterize credit rationing through the capital accumulation process. The model shows that credit rationing on investment loans decreases as capital accumulates and the enforcement cost decreases. We find that the evolution of the interest rate factor (lending interest rate/depositing interest rate) has a similar pattern to the credit rationing probability. However, simulations show that the evolution of the interest rate spread through the capital accumulation process depends on the degree of the enforcement cost. In the empirical part of the paper, we consider fifty-two countries, at different stages of development, over the period 1995–2005. We confirm the theoretical findings relative to the evolution of the interest rate spread and interest rate factor with capital accumulation. These results suggest that, for economies endowed with costly contract enforcement, the interest rate factor could be a better proxy of credit rationing than the interest rate spread. Keywords: Credit rationing; Capital accumulation; Interest rate; Rule of law (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:6:p:2719-2729 DOI: 10.1016/j.econmod.2011.06.005 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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