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How We Might Model a Credit Squeeze, and Draw Some Policy Implications for Responding to It

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  • Sinclair, Peter J. N.

Abstract

This paper endeavours to illustrate the consequences of a credit squeeze by inserting a standard model of retail banks into some familiar macroeconomic models. Some possible policy conclusions are drawn about the benefits of incentives to increase lending at these times, and to reduce it in much better times.

Suggested Citation

  • Sinclair, Peter J. N., 2008. "How We Might Model a Credit Squeeze, and Draw Some Policy Implications for Responding to It," Economics Discussion Papers 2008-40, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:7461
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    References listed on IDEAS

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    1. Naohiko Baba & Motoharu Nakashima & Yosuke Shigemi & Kazuo Ueda, 2006. "The Bank of Japan's Monetary Policy and Bank Risk Premiums in the Money Market," International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March.
    2. He, Ping & Huang, Lixin & Wright, Randall, 2008. "Money, banking, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1013-1024, September.
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    5. Willem H. Buiter, 2008. "Central banks and financial crises," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 495-633.
    6. G. B. Gorton & Ping He, 2008. "Bank Credit Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(4), pages 1181-1214.
    7. Ping He & Lixin Huang & Randall Wright, 2005. "Money And Banking In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 637-670, May.
    8. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
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    12. Charles A. E. Goodhart, 2008. "The Regulatory Response to the Financial Crisis," CESifo Working Paper Series 2257, CESifo.
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    More about this item

    Keywords

    Credit famine; credit crunch;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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