Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Macroeconomics

Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui

Ed. by Abraham, Arpad / Carceles-Poveda , Eva / Debortoli, Davide / Lambertini, Luisa / Nimark, Kristoffer / Wang, Pengfei

2 Issues per year


IMPACT FACTOR 2016: 0.043
5-year IMPACT FACTOR: 0.376

CiteScore 2016: 0.36

SCImago Journal Rank (SJR) 2016: 0.312
Source Normalized Impact per Paper (SNIP) 2016: 0.272

Online
ISSN
1935-1690
See all formats and pricing
More options …

Bank Lending with Imperfect Competition and Spillover Effects

Sumru G Altug / Murat Usman
Published Online: 2006-07-11 | DOI: https://doi.org/10.2202/1534-5998.1452

We examine bank lending decisions in an economy with spillover effects in the creation of new investment opportunities and asymmetric information in credit markets. We examine price-setting equilibria with horizontally differentiated banks. If bank lending takes place under a weak corporate governance mechanism and is fraught with agency problems and ineffective bank monitoring, then an equilibrium emerges in which loan supply is strategically restricted. In this equilibrium, the loan restriction, the "under-lending" strategy, provides an advantage to one bank by increasing its market share and sustaining monopoly interest rates. The bank's incentives for doing so increase under conditions of increased volatility of lending capacities of banks, more severe borrower-side moral hazard, and lower returns on the investment projects. Although this equilibrium is not always unique, with poor bank monitoring and corporate governance, a more intense banking competition renders the bad equilibrium the unique outcome.

Keywords: bank lending; threshold effects; underlending equilibria; interest rate competition

About the article

Published Online: 2006-07-11


Citation Information: Topics in Macroeconomics, ISSN (Online) 1534-5998, DOI: https://doi.org/10.2202/1534-5998.1452.

Export Citation

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston. Copyright Clearance Center

Comments (0)

Please log in or register to comment.
Log in