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Saving eliminates credit rationing

de Meza, David and Webb, David C. (2001) Saving eliminates credit rationing. Discussion paper, 391. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Equilibrium credit rationing, in the sense of Stiglitz and Weiss (1981), implies the borrower faces an infinite marginal cost of funds. Infinitessimily delaying the project to accumulate more wealth is therefore advantageous to the borrower. As a result, the well-known conditions for credit rationing cannot be satisfied.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2001 The Authors
Library of Congress subject classification: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Identification Number: 391
Date Deposited: 28 Aug 2009 16:08

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