(This abstract was borrowed from another version of this item.)"> (This abstract was borrowed from another version of this item.)">
[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/a/ecj/econjl/v97y1987i386p327-52.html
   My bibliography  Save this article

Credit Rationing and Effective Supply Failures

Author

Listed:
  • Blinder, Alan S
Abstract
This paper presents two macro models in which central bank policy has real effects on the supply side of the economy due to credit rationing. In each model, there are two possible regimes, depending on whether credit is or is not rationed. Starting from an unrationed equilibrium, either a large enough contraction of bank reserves or a large enough rise in aggregate demand can lead to rationing. Monetary (fiscal) policy is shown to be more (less) powerful when there is rationing than when there is not. In the first model, credit rationing reduces working capital. There is a failure of effective supply in that credit-starved firms must reduce production below national supply. The resulting excess demand in the goods market may in turn drive prices up and reduce the real supply of credit further, leading to further reductions in supply and a stagflationary spiral. In the second model, credit rationing reduces investment, which cuts into both aggregate demand and supply. Despite the effect on demand, stagflationary instability is still possible. A rise in government spending crowds out investment in the rationed regime but crowds in investment in the unrationed regime.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Blinder, Alan S, 1987. "Credit Rationing and Effective Supply Failures," Economic Journal, Royal Economic Society, vol. 97(386), pages 327-352, June.
    • Handle: RePEc:ecj:econjl:v:97:y:1987:i:386:p:327-52
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0013-0133%28198706%2997%3A386%3C327%3ACRAESF%3E2.0.CO%3B2-0&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Blinder, Alan S & Stiglitz, Joseph E, 1983. "Money, Credit Constraints, and Economic Activity," American Economic Review, American Economic Association, vol. 73(2), pages 297-302, May.
    2. Blinder, Alan S. & Fischer, Stanley, 1981. "Inventories, rational expectations, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 277-304.
    3. Honkapohja, Seppo & Ito, Takatoshi, 1983. "Stability with regime switching," Journal of Economic Theory, Elsevier, vol. 29(1), pages 22-48, February.
    4. Blinder, Alan S, 1982. "Inventories and Sticky Prices: More on the Microfoundations of Macroeconomics," American Economic Review, American Economic Association, vol. 72(3), pages 334-348, June.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    6. Bernanke, Ben S, 1981. "Bankruptcy, Liquidity, and Recession," American Economic Review, American Economic Association, vol. 71(2), pages 155-159, May.
    7. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    8. King, Robert G & Plosser, Charles I, 1984. "Money, Credit, and Prices in a Real Business Cycle," American Economic Review, American Economic Association, vol. 74(3), pages 363-380, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alejandro Diaz-Bautista & Julio R. Escandon, 2003. "A Simple Dynamic Model of Credit and Aggregate Demand," Macroeconomics 0308001, University Library of Munich, Germany.
    2. Froyen, Richard T & Waud, Roger N, 1988. "Real Business Cycles and the Lucas Paradigm," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 183-201, April.
    3. Bardsen, G. & Klovland, J.T., 1990. "Finding The Rigth Nominal Anchor: The Cointegration Of Money, Credit And Nominal Income In Norway," The Warwick Economics Research Paper Series (TWERPS) 350, University of Warwick, Department of Economics.
    4. Goodhart, Charles, 1989. "The Conduct of Monetary Policy," Economic Journal, Royal Economic Society, vol. 99(396), pages 293-346, June.
    5. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    6. Ben S. Bernanke & Mark L. Gertler, 1985. "Banking in General Equilibrium," NBER Working Papers 1647, National Bureau of Economic Research, Inc.
    7. Ramey, Valerie, 1993. "How important is the credit channel in the transmission of monetary policy?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 1-45, December.
    8. Loungani, Prakash & Rush, Mark, 1995. "The Effect of Changes in Reserve Requirements on Investment and GNP," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 511-526, May.
    9. Chava, Sudheer & Purnanandam, Amiyatosh, 2011. "The effect of banking crisis on bank-dependent borrowers," Journal of Financial Economics, Elsevier, vol. 99(1), pages 116-135, January.
    10. Yuan, Mingwei & Zimmermann, Christian, 2004. "Credit crunch in a model of financial intermediation and occupational choice," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 637-659, December.
    11. Anil K. Kashyap & Jeremy C. Stein, 1994. "Monetary Policy and Bank Lending," NBER Chapters, in: Monetary Policy, pages 221-261, National Bureau of Economic Research, Inc.
    12. Calomiris, Charles W & Hubbard, R Glenn, 1990. "Firm Heterogeneity, Internal Finance, and 'Credit Rationing.'," Economic Journal, Royal Economic Society, vol. 100(399), pages 90-104, March.
    13. N. Gregory Mankiw, 1986. "The Allocation of Credit and Financial Collapse," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 455-470.
    14. Mark Gertler & R. Glenn Hubbard, 1988. "Financial factors in business fluctuations," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 33-78.
    15. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    16. Committee, Nobel Prize, 2022. "Financial Intermediation and the Economy," Nobel Prize in Economics documents 2022-2, Nobel Prize Committee.
    17. Eckalbar, John C., 1985. "Inventories in a dynamic macro model with flexible prices," European Economic Review, Elsevier, vol. 27(2), pages 201-219, March.
    18. László, Géza & Zsámboki, Balázs, 1995. "Pénz, pénzügyi közvetítők és a reálgazdaság [Money, financial mediators and the real economy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 667-684.
    19. Duca, John V., 2013. "Did the commercial paper funding facility prevent a Great Depression style money market meltdown?," Journal of Financial Stability, Elsevier, vol. 9(4), pages 747-758.
    20. Marsh, W. Blake & Sharma, Padma, 2024. "Loan guarantees in a crisis: An antidote to a credit crunch?," Journal of Financial Stability, Elsevier, vol. 72(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:97:y:1987:i:386:p:327-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/resssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.