Affordable Access

ECONOMICS OF REGULATION: CREDIT RATIONING AND EXCESS LIQUIDITY

Authors
  • Cho, Hyejin
Publication Date
Apr 10, 2017
Source
HAL-UPMC
Keywords
Language
English
License
Unknown
External links

Abstract

In examining the global imbalance by the excess liquidity level, the argument is whether commercial banks want to hold excess reserves for the precautionary aim or expect to get better return through risky decision. By pictorial representations, risk preference in the Machina's triangle (1982, 1987) encapsulates motivation to hold excess liquidity. This paper introduces an endogenous liquidity model for the financial sector where the imbalance argument comes from credit rationing extended from outside liquidity (Holmstrom and Tirole, 2011). We also conduct a stylistic analysis of excess liquidity in Jordan and Lebanon from 1993 to 2015. As such, the proposed model exemplifies the combination of credit, liquidity and regulation.

Report this publication

Statistics

Seen <100 times