TY  - JOUR
AU  - Stiglitz,Joseph E.
AU  - Weiss,Andrew
TI  - Macro-Economic Equilibrium and Credit Rationing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2164
PY  - 1987
Y2  - 1987
UR  - http://www.nber.org/papers/w2164
L1  - http://www.nber.org/papers/w2164.pdf
N1  - Author contact info:
Joseph E. Stiglitz
Uris Hall, Columbia University
3022 Broadway, Room 814
New York, NY  10027
Tel: 212/854-0671
Fax: 212/662-8474
E-Mail: jes322@columbia.edu

Andrew Weiss
Weiss Asset Management
29 Commonwealth Avenue, 10th Floor
Boston, MA 02116
Tel: 617-778-7780
Fax: 617-778-7781
E-Mail: aweiss@weissasset.com
AB  - In this paper we investigate the macro-economic equilibria of an economy in which credit contracts have both adverse selection and incentive effects. The terms of credit contracts include both an interest rate and a collateral requirement. We show that in this richer model all types of borrowers may be rationed. Interest rates charged borrowers may move either pro or counter-cyclically. If pro-cyclical shocks have a greater effect on the success probabilities of risky techniques than on safe ones, then the interest rate offered depositors may also move counter-cyclically. Finally, we show that the impact of monetary policy on the macro-economic equilibrium is affected by whether or not the economy is in a regime in which credit is rationed.
ER  -