Contagion and volatility with imperfect credit markets:
This paper interprets contagion effects as a perceived increase (triggered by events occurring elsewhere) in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic banks b...
Gespeichert in:
| Hauptverfasser: | , |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Cambridge, Mass.
1997
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| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
6080 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | This paper interprets contagion effects as a perceived increase (triggered by events occurring elsewhere) in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic banks borrow at a premium on world capital markets, and domestic producers (whose demand for credit results from working capital needs) borrow at a premium from domestic banks which possess comparative advantage in monitoring the behavior of domestic agents. Financial intermediation spreads are shown to be determined by a markup that compensates for the expected cost of contract enforcement and state verification and for the expected revenue lost in adverse states of nature. Higher volatility of producers' productivity shocks increases both financial spreads and the producers' cost of capital, resulting in lower employment and higher incidence of default. The welfare effects of volatility are non-linear. Higher volatility does not impose any welfare cost for countries characterized by relatively low volatility and efficient financial intermediation. The adverse welfare effects are large (small) for countries that are at the threshold of full integration with international capital markets (close to financial autarky), that is, countries characterized by a relatively low (high) probability of default. |
| Beschreibung: | 23 S. graph. Darst. |
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| 520 | |a This paper interprets contagion effects as a perceived increase (triggered by events occurring elsewhere) in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic banks borrow at a premium on world capital markets, and domestic producers (whose demand for credit results from working capital needs) borrow at a premium from domestic banks which possess comparative advantage in monitoring the behavior of domestic agents. Financial intermediation spreads are shown to be determined by a markup that compensates for the expected cost of contract enforcement and state verification and for the expected revenue lost in adverse states of nature. Higher volatility of producers' productivity shocks increases both financial spreads and the producers' cost of capital, resulting in lower employment and higher incidence of default. The welfare effects of volatility are non-linear. Higher volatility does not impose any welfare cost for countries characterized by relatively low volatility and efficient financial intermediation. The adverse welfare effects are large (small) for countries that are at the threshold of full integration with international capital markets (close to financial autarky), that is, countries characterized by a relatively low (high) probability of default. | ||
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| id | DE-604.BV011728932 |
| illustrated | Illustrated |
| indexdate | 2024-07-09T18:14:46Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-007911176 |
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| physical | 23 S. graph. Darst. |
| publishDate | 1997 |
| publishDateSearch | 1997 |
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| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Agénor, Pierre-Richard 1957- Verfasser (DE-588)12408009X aut Contagion and volatility with imperfect credit markets Pierre-Richard Agénor ; Joshua Aizenman Cambridge, Mass. 1997 23 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 6080 This paper interprets contagion effects as a perceived increase (triggered by events occurring elsewhere) in the volatility of aggregate shocks impinging on the domestic economy. The implications of this approach are analyzed in a model with two types of credit market imperfections: domestic banks borrow at a premium on world capital markets, and domestic producers (whose demand for credit results from working capital needs) borrow at a premium from domestic banks which possess comparative advantage in monitoring the behavior of domestic agents. Financial intermediation spreads are shown to be determined by a markup that compensates for the expected cost of contract enforcement and state verification and for the expected revenue lost in adverse states of nature. Higher volatility of producers' productivity shocks increases both financial spreads and the producers' cost of capital, resulting in lower employment and higher incidence of default. The welfare effects of volatility are non-linear. Higher volatility does not impose any welfare cost for countries characterized by relatively low volatility and efficient financial intermediation. The adverse welfare effects are large (small) for countries that are at the threshold of full integration with international capital markets (close to financial autarky), that is, countries characterized by a relatively low (high) probability of default. Kapitaalmarkt gtt Onvolledige concurrentie gtt Ökonometrisches Modell Bank deposits Econometric models Bank loans Econometric models Banks and banking, International Econometric models Capital market Econometric models Credit Econometric models Default (Finance) Econometric models Intermediation (Finance) Econometric models Aizenman, Joshua 1949- Verfasser (DE-588)124080057 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 6080 (DE-604)BV002801238 6080 http://papers.nber.org/papers/w6080.pdf kostenfrei Volltext |
| spellingShingle | Agénor, Pierre-Richard 1957- Aizenman, Joshua 1949- Contagion and volatility with imperfect credit markets National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Kapitaalmarkt gtt Onvolledige concurrentie gtt Ökonometrisches Modell Bank deposits Econometric models Bank loans Econometric models Banks and banking, International Econometric models Capital market Econometric models Credit Econometric models Default (Finance) Econometric models Intermediation (Finance) Econometric models |
| title | Contagion and volatility with imperfect credit markets |
| title_auth | Contagion and volatility with imperfect credit markets |
| title_exact_search | Contagion and volatility with imperfect credit markets |
| title_full | Contagion and volatility with imperfect credit markets Pierre-Richard Agénor ; Joshua Aizenman |
| title_fullStr | Contagion and volatility with imperfect credit markets Pierre-Richard Agénor ; Joshua Aizenman |
| title_full_unstemmed | Contagion and volatility with imperfect credit markets Pierre-Richard Agénor ; Joshua Aizenman |
| title_short | Contagion and volatility with imperfect credit markets |
| title_sort | contagion and volatility with imperfect credit markets |
| topic | Kapitaalmarkt gtt Onvolledige concurrentie gtt Ökonometrisches Modell Bank deposits Econometric models Bank loans Econometric models Banks and banking, International Econometric models Capital market Econometric models Credit Econometric models Default (Finance) Econometric models Intermediation (Finance) Econometric models |
| topic_facet | Kapitaalmarkt Onvolledige concurrentie Ökonometrisches Modell Bank deposits Econometric models Bank loans Econometric models Banks and banking, International Econometric models Capital market Econometric models Credit Econometric models Default (Finance) Econometric models Intermediation (Finance) Econometric models |
| url | http://papers.nber.org/papers/w6080.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT agenorpierrerichard contagionandvolatilitywithimperfectcreditmarkets AT aizenmanjoshua contagionandvolatilitywithimperfectcreditmarkets |