Inefficient Provision of Liquidity

Hart, Oliver; Zingales, Luigi

doi:10.3386/w17299

Cited by 20 publications

(23 citation statements)

References 41 publications

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“…We analyze this case in a simplified setting in Hart and Zingales (2011), and show that our results generalize. In particular, lending does not resolve the tension between private and social objectives.…”

Section: An Extensionmentioning

confidence: 70%

Liquidity and Inefficient Investment

Hart¹,

Zingales²

2013

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We study the role of fiscal policy in a complete markets model where the only friction is the nonpledgeability of human capital. We show that the competitive equilibrium is constrained inefficient, leading to too little risky investment. We also show that fiscal policy following a large negative shock can increase ex ante welfare. Finally, we show that if the government cannot commit to the promised level of fiscal intervention, the ex post optimal fiscal policy will be too small from an ex ante perspective.

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Section: An Extensionmentioning

confidence: 70%

Liquidity and Inefficient Investment

Hart¹,

Zingales²

2013

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“…InterestinglyDobbie and Skiba (2013) find evidence of what might be termed advantageous moral hazard for a payday lender: a larger loan size reduces default, all else equal. 15 See alsoHart and Zingales (2011), where increasing collateralized debt increases the price of whatever good is being financed with the debt, generating a negative externality on other borrowers/consumers.…”

mentioning

confidence: 99%

Consumer Credit: Too Much or Too Little (or Just Right)?

Zinman

2013

SSRN Journal

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“…It is the ability to finance their loan and investment portfolios by issuing liabilities that serve as a generally accepted means of payment, i.e. money (Hart & Zingales, 2011;OECD, 2017). Furthermore, bank deposits do not represent real savings (i.e.…”

Section: Role Of Banks In Creation Of Money and New Purchasing Powermentioning

confidence: 99%

Bank credit and money creation in a DSGE model of a small open economy

Karmelavičius

Ramanauskas

2019

Baltic Journal of Economics

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By the act of lending banks do not actually intermediate preaccumulated real resources but rather create new financial resources in the form of deposits. Therefore, bank credit needs to be modelled as a monetary phenomenon, which directly fuels domestic demand and inflationary pressures. So far, there have been just a few attempts to model banks as monetary institutions in the DSGE model. In this paper we propose a simple DSGE model, which nevertheless accommodates banks as genuinely monetary institutions and captures banks' institutional ability to create money. Our model features a small open economy with nominal prices, savers and borrowers and a banking sector. Following an exogenously induced shock to banker's willingness to lend, the bank does not have to raise deposit rates or significantly increase borrowing from abroad as deposit dynamics closely resembles that of credit, which allows us to analyse real and nominal consequences of bank credit (and money) creation. ARTICLE HISTORY

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Inefficient Provision of Liquidity

Cited by 20 publications

References 41 publications

Liquidity and Inefficient Investment

Liquidity and Inefficient Investment

Consumer Credit: Too Much or Too Little (or Just Right)?

Bank credit and money creation in a DSGE model of a small open economy

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