Entrepreneurial Moral Hazard and Bank Monitoring: A Model of the Credit Channel

Rafael Repullo and Javier Suarez

No 2060, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper develops a model of the choice between bank and market finance by entrepreneurial firms that differ in the value of their net worth. The monitoring associated with bank finance ameliorates a moral hazard problem between the entrepreneurs and their lenders. The model is used to analyze the different strands of the credit view of the transmission of monetary policy. In particular, we derive the empirical implications of a broad credit channel, and compare them to those obtained when the model is extended to incorporate some elements of the bank lending channel.

Keywords: bank monitoring; Capital Requirements; Credit Markets; interest rate ceilings; Monetary transmission Mechanism (search for similar items in EconPapers)
JEL-codes: D82 E44 E50 (search for similar items in EconPapers)
Date: 1999-01
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Entrepreneurial moral hazard and bank monitoring: A model of the credit channel (2000)
Working Paper: Entrepreneurial moral hazard and bank monitoring: a model of the credit channel (1999)
Working Paper: Entrepreneurial Moral Hazard and Bank Monitoring: A Model of the Credit Channel (1996)
Working Paper: Entrepreneurial Moral Hazard and Bank Monitoring: A Model of the Credit Channel (1996)
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