Macroeconomic Models with Equity and Credit Rationing

   (597 K)

This paper presents a simple, general equilibrium macroeconomic model incorporating financial constraints, both credit and equity rationing, as well as other informational imperfections in labor and product markets, such as efficiency wage effects. A formulation somewhat analogous to the standard IS-LM model, but not suffering from the well known defects of that model, is derived. The mechanisms by which monetary policy affects the economy are described. Dynamics, including implications for long run growth, are investigated.

Published:

• Bruce C. Greenwald & Joseph E. Stiglitz & Andrew Weiss, 1989. "Macroeconomic models with equity and credit rationing," Proceedings, Federal Reserve Bank of San Francisco. ,
• Assymetric Information, Corporate Finance, and Investment, edited by R. Glenn Hubbard, pp. 15-42. Chicago, IL: University of Chicago Press, 1990. ,
• Macroeconomic Models with Equity and Credit Rationing, Bruce C. Greenwald, Joseph E. Stiglitz, in Asymmetric Information, Corporate Finance, and Investment, University of Chicago Press, 1990
  

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