Memory in Contracts: The experience of the EBRD (1991-2003)

Lionel Artige and Rosella Nicolini

CREPP Working Papers from Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège

Abstract: The objective of this paper is to identify the role of memory in repeated contracts with moral hazard in financial intermediation. We use an original dataset from the European Bank for Reconstruction and Development to test a basic model with repeated moral hazard. To capture the role of memory, we need to control for the adverse selection effect. We propose a simple empirical method to achieve it. Our results unambiguously isolate the effect of memory in the bank's lending decisions.

Date: 2008
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Related works:
Working Paper: Memory in Contracts: The Experience of the EBRD (1991-2003) (2010)
Working Paper: Memory in Contracts: The Experience of the EBRD (1991-2003) (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:rpp:wpaper:0803

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