EconPapers    
Economics at your fingertips  
 

The Risky Lending Gap

Gregory Connor ()

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: This paper develops a simple model of the gap between socially and privately optimal bank lending when a bank has an overhang of impaired loans, and analyzes government policies designed to close this gap. The impaired loans have risky cash flows but observable market values. A number of basic concepts are explicated including the risky lending gap,the capital component and asset risk component of the risky lending gap, capital injections versus asset purchases as policy tools, decomposition of the effects of asset purchases into loan substitution and risk absorption effects, the supply schedule of risky lending, the no-lending trap, and a risk-capital metric for comparing the various policy choices. The model is calibrated to match the current Irish banking environment and some tentative policy implications are suggested.

Pages: 41 pages
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://repec.maynoothuniversity.ie/mayecw-files/N2010809.pdf (application/pdf)

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:may:mayecw:n2010809.pdf

Access Statistics for this paper

More papers in Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2022-01-27
Handle: RePEc:may:mayecw:n2010809.pdf