Long term debt with hidden borrowing
Heski Bar-Isaac () and
Vicente Cuñat ()
Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
We consider borrowers with the opportunity to raise funds from a competitive baking sector, that shares information about borrowers, and an alternative hidden lender. We highlight that the presence of the hidden lender restricts the contracts that can be obtained from the banking sector and that in equilibrium some borrowers obtain funds from both the banking sector and the (inefficient) hidden lender simultaneously. We further show that as the inefficiency of the hidden lender increases, total welfare decreases. By extending the model to examine a partially hidden lender, we further highlight the key role of information.
Keywords: Hidden Borrowing; Informal Lenders; Borrower Screening; Long Term Debt (search for similar items in EconPapers)
JEL-codes: D14 G21 G33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://econ-papers.upf.edu/papers/803.pdf Whole Paper (application/pdf)
Working Paper: Long term debt with Hidden Borrowing (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:803
Access Statistics for this paper
More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).