Financial Liberalization and Intervention: A New Analysis of Credit Rationing

Financial Liberalization and Intervention: A New Analysis of Credit Rationing

by Santonu Basu


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Basu (business, South Bank U., London) examines why policies of financial liberalization and intervention have failed to improve all borrowers' access to the loan market. His theory of credit rationing introduces the concepts of credit standard and credit risk as a way of understanding why bankers ration credit to some while offering loans to others. The text is based upon the author's Ph.D. dissertation. Annotation c. Book News, Inc.,Portland, OR

Product Details

ISBN-13: 9781840649659
Publisher: Elgar, Edward Publishing, Inc.
Publication date: 01/01/2002
Series: New Directions in Modern Economics Series
Pages: 168
Product dimensions: 5.60(w) x 8.60(h) x 0.70(d)

Table of Contents

1General Introduction1
2A critical review of the literature on credit rationing16
2.1The availability doctrine17
2.2The ceiling on interest rates as a possible explanation for banks refusing loans to some borrowers24
2.3Capacity to pay does not rise in proportion to the rise in the contractual payment: an explanation of credit rationing29
3The theory of credit rationing revisited39
3.2The credit standard41
3.3Credit risk47
3.4Differential access to the loan market53
4Financial liberalization64
4.2Are savings a function of interest rate?66
4.3The relationship between availability of credit and investment growth68
4.4Is it possible to switch between projects at zero cost?72
5Intervention I: The South Korean experience80
5.2An analysis of why intervention is necessary and the form it could take81
5.3Where intervention went wrong86
6Intervention II: The Indian experience99
6.2The Indian government's reasons for intervention and its consequences101
6.3An analysis of intervention107
7Concluding remarks121

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