Front Matter Page
Monetary and Capital Markets Department
Authorized for distribution by Daniel Hardy
Contents
I. Introduction
II. The Model
III. Model Analysis
A. Full Information
B. Equilibria with Partial Information and Two Bank Types
Pooling
Separating
A parameterized example
C. Separating Equilibrium with Partial Information and a Continuum of Bank Types
IV. Extension
A. Investment in Loan Technology
B. Pervasive Moral Hazard and Low-Credit Outcomes
V. Summary and Conclusions
References
Table
1. Expected Payoffs in Different States
2. Investment Decision Starting From and Ending at Pooling Equilibria
3. Investment Decision Starting From and Ending at Separating Equilibria
Figures
1. Change in the ratio of credit to GDP, 2003–2007
2. The Value Function for Different Types: Separating Equilibrium
3. Credit Volumes and Bank Characteristics for a Continuum of Types
4. Separating Equilibrium with Low Credit Volume
5. Pooling Equilibrium with Low Credit Volume
Appendix
I: Expected Loan Losses in a Pooling Equilibrium
II: Regularity Conditions on the Objective Function with a Continuum of Bank Types