Equilibrium lending mechanism and aggregate activity

Cheng Wang; Ruilin Zhou

doi:10.1111/j.1468-2354.2010.00595.x

Equilibrium lending mechanism and aggregate activity

Cheng Wang, Ruilin Zhou

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We construct a model of the credit market where financial contracting is subject to costly state verification and moral hazard. The economy's aggregate activity and its equilibrium lending mechanism are determined jointly. We analyze how changes in the model's exogenous variables, including the returns of the economy's investment projects and the supply of loans, affect the economy's aggregate output and the types of the credit through which investment is funded.

Original language	English (US)
Pages (from-to)	631-651
Number of pages	21
Journal	International Economic Review
Volume	51
Issue number	3
DOIs	https://doi.org/10.1111/j.1468-2354.2010.00595.x
State	Published - Aug 2010

All Science Journal Classification (ASJC) codes

Economics and Econometrics

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10.1111/j.1468-2354.2010.00595.x

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abstract = "We construct a model of the credit market where financial contracting is subject to costly state verification and moral hazard. The economy's aggregate activity and its equilibrium lending mechanism are determined jointly. We analyze how changes in the model's exogenous variables, including the returns of the economy's investment projects and the supply of loans, affect the economy's aggregate output and the types of the credit through which investment is funded.",

author = "Cheng Wang and Ruilin Zhou",

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Equilibrium lending mechanism and aggregate activity

Abstract

All Science Journal Classification (ASJC) codes

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