Abstract
Credit rationing – a situation in which lenders are unwilling to advance additional funds to borrowers at the prevailing market interest rate – is now widely recognized as a problem arising because of information and control limitations in financial markets. This article reviews various motivations behind research on credit rationing, traces the history of theoretical efforts to explain how this phenomenon can persist in equilibrium, and reviews recent empirical research on its prevalence and effects. In the process, credit rationing is shown to be simply an extreme case of the more general problem of capital market misallocation.
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Calomiris, C.W., Longhofer, S.D., Jaffee, D.M. (2018). Credit Rationing. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_479
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DOI: https://doi.org/10.1057/978-1-349-95189-5_479
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