Credit Guarantees and Subsidies when Lender has a Market Power

Karel Janda

No 2011/18, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Provision of credit guarantees or subsidies may remove an adverse selection leading to credit rationing. This paper concentrates on comparison of government budget costs of credit guarantees and subsidies in a monopolistic credit market. Di?erent opportunity costs among entrepreneurs, which re?ect di?erent mixes of general and human speci?c capital, generate di?erent outcomes in the model. As long as the participation costs of low-risk entrepreneurs are su?ciently close to the participation costs of high-risk entrepreneurs, the budget-cost minimizing government should prefer guarantees over interest rate subsidies as an intervention instrument.

Keywords: credit; subsidies; guarantees (search for similar items in EconPapers)
JEL-codes: D82 G18 H25 (search for similar items in EconPapers)
Pages: 33pages
Date: 2011-06, Revised 2011-06
New Economics Papers: this item is included in nep-ban and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://ies.fsv.cuni.cz/default/file/download/id/16883 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://ies.fsv.cuni.cz/default/file/download/id/16883 [301 Moved Permanently]--> https://ies.fsv.cuni.cz/default/file/download/id/16883)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2011_18

Access Statistics for this paper

More papers in Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().