Dollars Dollars Everywhere, nor Any Dime to Lend : Credit Limit Constraints on Financial Sector Absorptive Capacity
We exploit an unexpected inflow of liquidity in an emerging market to study how capital is intermediated to firms. We find that backward-looking credit limit constraints imposed by banks make it difficult for firms to borrow, despite readily available bank liquidity, healthy aggregate demand, and a sharply falling cost of capital. The resulting aggregate failure to extend and retain capital in the economy suggests that agency costs that force banks to rely on sticky balance-sheet-based credit limits prevent emerging economies from effectively intermediating capital.
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| Main Authors: | , , |
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| Format: | Journal Article biblioteca |
| Language: | EN |
| Published: |
2010
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| Subjects: | Capital, Investment, Capacity E220, Financial Markets and the Macroeconomy E440, Banks, Other Depository Institutions, Micro Finance Institutions, Mortgages G210, Economic Development: Financial Markets, Saving and Capital Investment, Corporate Finance and Governance O160, International Linkages to Development, Role of International Organizations O190, |
| Online Access: | http://hdl.handle.net/10986/4630 |
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