Equilibrium loan contracts and endogenous growth in the presence of asymmetric information

Article Abstract:

An endogenous growth model is used where an informational asymmetry exists between capital producing borrowers and lenders regarding the borrower's ability to operate an investment project successfully. Either by rationing a fraction of borrowers or by utilizing an expensive screening technology, or using a combination of the two, the lender can begin self-selection. The growth rate of output is shown to have lowered with decreased screening cost. The advantage of an advanced financial sector in a higher growth rate is only shown when a certain level of sophistication is achieved.

Mortgage and Nonmortgage Loan Brokers, Consumer Loans, Research, Loans, Personal loans, Credit market, Credit markets

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Pricing free bank notes

Article Abstract:

A study has been conducted to investigate the pricing of private money taking account the enormous changes in technology within a certain period. Private money contracts are believed to be difficult to enforce since bank notes are risky and non-interest bearing. The analysis of bank notes must take into consideration the redemption option in bank note contract, since this option allowed note holders to run on banks. Wildcat banking was not a prevalent problem during the Free Banking Era since market participants could discipline banks by pricing factors that affected risk.

Other General Government Support, Coinage & Currency, Economic aspects, Money, Money demand, Bank notes, Bills of exchange, Drafts (Finance)

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