A Model of Moral-hazard Credit Cycles
نویسنده
چکیده
This paper considers a simple model of credit cycles driven by moral hazard in financial intermediation. Financial agents or bankers must earn moral-hazard rents, but the cost of these rents can be efficiently spread over an agent's entire career, by promising large late-career rewards if the agent has a consistently successful record. Dynamic interactions among different generations of financial agents can create credit cycles with repeated booms and recessions. In recessions, a scarcity of trusted financial intermediaries limits investment and reduces employment. Under such conditions, taxing workers to subsidize bankers may increase employment enough to make the workers better off.
منابع مشابه
1 MORAL - HAZARD CREDIT CYCLES WITH RISK - AVERSE AGENTS by Roger
MORAL-HAZARD CREDIT CYCLES WITH RISK-AVERSE AGENTS by Roger B. Myerson http://home.uchicago.edu/~rmyerson/research/rabankers.pdf Abstract: We consider a simple overlapping-generations model with risk-averse financial agents subject to moral hazard. Efficient contracts for such financial intermediaries involve backloaded late-career rewards. Compared to the analogous model with risk-neutral agen...
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