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Credit Rationing and Asset Value

Author

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  • Antonio Affuso

    (Politecnico di Milano)

Abstract

This paper investigates the effect of real assets as collateral on the economy. I construct a model that shows how credit rationing is mitigated by the existence of bad firms whether it is linked to the value of distressed assets. The model builds on Stiglitz and Weiss (1981) and Shleifer and Vishny (1992). The price of distressed assets is endogenous and it depends on the number of bad firms in the economy as well as on the liquidity of good firms. In the model it is possible to have a separating equilibrium only if there exists a number of bad firms.

Suggested Citation

  • Antonio Affuso, 2008. "Credit Rationing and Asset Value," Rivista di Politica Economica, SIPI Spa, vol. 98(3), pages 33-54, May-June.
    • Handle: RePEc:rpo:ripoec:v:98:y:2008:i:3:p:33-54
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    Cited by:

    1. A. Affuso, 2007. "Credit rationing and real assets: evidence from Italian panel data," Economics Department Working Papers 2007-EP09, Department of Economics, Parma University (Italy).
    2. Alin Marius Andrieș & Nicu Marcu & Florin Oprea & Mihaela Tofan, 2018. "Financial Infrastructure and Access to Finance for European SMEs," Sustainability, MDPI, vol. 10(10), pages 1-15, September.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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