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Innovation in Banking and Excessive Loan Growth

The volume of credit extended by a bank can be an informative signal of its abilities in loan selection and management. It is shown that, under asymmetric information, banks may therefore rationally lend more than they would otherwise in order to demonstrate their quality, thus negatively affecting financial system soundness. Small shifts in technology and uncertainty associated with new technology may lead to large jumps in equilibrium outcomes. Prudential measures and supervision are therefore warranted
Table Of Contents
Contents; I. Introduction; Figures; 1. Change in the ratio of credit to GDP, 2003-2007; II. The Model; Tables; 1. Expected Payoffs in Different States; III. Model Analysis; A. Full Information; B. Equilibria with Partial Information and Two Bank Types; Pooling; Separating; A parameterized example; C. Separating Equilibrium with Partial Information and a Continuum of Bank Types; 2. The Value Function for Different Types: Separating Equilibrium; IV. Extensions; A. Investment in Loan Technology; 3. Credit Volumes and Bank Characteristics for a Continuum of Types
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (30 p.)
Specific Material Designation
Form Of Item

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