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Flight to Quality or to Captivity: Information and Credit Allocation
Author:
Mr. Giovanni Dell'Ariccia
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Mr. Robert Marquez null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 020
Language:
English
Publication Date:
01 Feb 2001
DOI:
https://doi.org/10.5089/9781451843842.001
ISBN:
9781451843842
ISSN:
1018-5941
Pages:
25
Keywords:
WP; bank; borrower; customer; bank-client relationship; banking; information; credit allocation; quality borrower; cost advantage; borrower opaqueness; cost of funds; competitor bank; bank-client specificity; Bank credit; Credit; Foreign banks; Loans; Demand elasticity
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Superior information exchanged over the course of lending relationships generates bank-client specificities to the extent that such information cannot be communicated credibly to outsiders. Consequently, banks obtain higher profits from more captured borrowers than from borrowers with financing alternatives. We refer to this as a “flight to captivity” effect. Negative shocks, associated with monetary contractions or foreign entry, cause a reallocation of bank credit away from more transparent borrowers and toward more opaque, more captured borrowers. The paper applies these ideas to the analysis of bank behavior in transition economies after financial liberalization and monetary policy contractions.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund