Credit allocation in heterogeneous banking systems
| Autor: | Marco M. Sorge, Christian Di Pietro, Marcello D'Amato |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
Economics and Econometrics
050208 finance Credit markets Asymmetric information Fragility Multiple equilibria Asymmetric information Multiple equilibria media_common.quotation_subject 05 social sciences Credit markets Monetary economics Investment (macroeconomics) Interest rate Variety (cybernetics) Competition (economics) Information asymmetry 0502 economics and business Economics Fragility Quality (business) 050207 economics Market share media_common Market failure |
| Zdroj: | German Economic Review. 21:1-33 |
| ISSN: | 1468-0475 1465-6485 |
| Popis: | World banking systems are almost invariably populated by relatively diverse financial institutions. This paper studies the operation of credit markets where heterogeneous banks compete for investment projects of varying quality in the presence of informational asymmetries. We emphasize on two dimensions of heterogeneity – access to project-specific information vis-à-vis funding costs – which naturally reflect lenders’ comparative disadvantages in the competitive landscape. Two main findings stand out. First, competition across heterogeneous banks can produce multiple equilibria. Thus, economies with similar fundamentals may well display a variety of interest rates and/or market shares for the operating institutions. Second, market failures (overlending) always prove mitigated in heterogeneous banking systems, relative to a world with equally uninformed lenders. This discipline effect however comes with a chance for market fragility, whereby modest changes in the business environment or other fundamentals can trigger large shifts in the price of credit, leading to either highly selective markets or rather ones which overfund ventures of the lowest quality. Extensions of the basic model and some policy implications are also discussed. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|
Plný text