Credit Rationing and Asset Value

Antonio Affuso

Rivista di Politica Economica, 2008, vol. 98, issue 3, 33-54

Abstract: This paper investigates the effect of real assets as collateral on the economy. I construct a model that shows how credit rationing is mitigated by the existence of bad firms whether it is linked to the value of distressed assets. The model builds on Stiglitz and Weiss (1981) and Shleifer and Vishny (1992). The price of distressed assets is endogenous and it depends on the number of bad firms in the economy as well as on the liquidity of good firms. In the model it is possible to have a separating equilibrium only if there exists a number of bad firms.

JEL-codes: D82 H23 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Credit Rationing and Asset Value (2007)
Working Paper: Credit rationing and asset value (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:rpo:ripoec:v:98:y:2008:i:3:p:33-54

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