Credit and inflation under borrowerʼs lack of commitment

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Credit and inflation under borrowerʼs lack of commitment

Here we investigate the existence of credit in a cash-in-advance economy where there are complete markets but for the fact that agents cannot commit to repay their debts. Defectors are banned from the credit market but they can use money balances for saving purposes. Without uncertainty, deflation crowds out credit completely. The equilibrium allocation, however, is efficient if the government ...

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ژورنال

عنوان ژورنال: Journal of Economic Theory

سال: 2011

ISSN: 0022-0531

DOI: 10.1016/j.jet.2011.03.015