Dysfunctional Finance : Positive Shocks and Negative Outcomes
n financial markets with asymmetric information about mean returns, borrowers with different default risks may pay the same rate of interest. If they do, the marginal borrower will have a high-risk, negative-value project. Under some conditions, technological change that increases each entrepreneur's output will attract a new set of negative-value projects. This adverse selection process will erode the ability rents of the inframarginal borrowers. I present an example in which it destroys the market. The results imply that a boom in a sector can lead to a crisis if institutional change to solve the screening problem does not occur.
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| Format: | Journal Article biblioteca |
| Language: | EN |
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2010
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| Subjects: | Asymmetric and Private Information D820, Banks, Other Depository Institutions, Micro Finance Institutions, Mortgages G210, Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure G320, Entrepreneurship L260, |
| Online Access: | http://hdl.handle.net/10986/5848 |
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dig-okr-1098658482021-04-23T14:02:23Z Dysfunctional Finance : Positive Shocks and Negative Outcomes Hoff, Karla Asymmetric and Private Information D820 Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Entrepreneurship L260 n financial markets with asymmetric information about mean returns, borrowers with different default risks may pay the same rate of interest. If they do, the marginal borrower will have a high-risk, negative-value project. Under some conditions, technological change that increases each entrepreneur's output will attract a new set of negative-value projects. This adverse selection process will erode the ability rents of the inframarginal borrowers. I present an example in which it destroys the market. The results imply that a boom in a sector can lead to a crisis if institutional change to solve the screening problem does not occur. 2012-03-30T07:34:50Z 2012-03-30T07:34:50Z 2010 Journal Article Journal of Globalization and Development 19481837 http://hdl.handle.net/10986/5848 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article |
| institution |
Banco Mundial |
| collection |
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| country |
Estados Unidos |
| countrycode |
US |
| component |
Bibliográfico |
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| databasecode |
dig-okr |
| tag |
biblioteca |
| region |
America del Norte |
| libraryname |
Biblioteca del Banco Mundial |
| language |
EN |
| topic |
Asymmetric and Private Information D820 Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Entrepreneurship L260 Asymmetric and Private Information D820 Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Entrepreneurship L260 |
| spellingShingle |
Asymmetric and Private Information D820 Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Entrepreneurship L260 Asymmetric and Private Information D820 Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Entrepreneurship L260 Hoff, Karla Dysfunctional Finance : Positive Shocks and Negative Outcomes |
| description |
n financial markets with asymmetric information about mean returns, borrowers with different default risks may pay the same rate of interest. If they do, the marginal borrower will have a high-risk, negative-value project. Under some conditions, technological change that increases each entrepreneur's output will attract a new set of negative-value projects. This adverse selection process will erode the ability rents of the inframarginal borrowers. I present an example in which it destroys the market. The results imply that a boom in a sector can lead to a crisis if institutional change to solve the screening problem does not occur. |
| format |
Journal Article |
| topic_facet |
Asymmetric and Private Information D820 Banks Other Depository Institutions Micro Finance Institutions Mortgages G210 Financing Policy Financial Risk and Risk Management Capital and Ownership Structure G320 Entrepreneurship L260 |
| author |
Hoff, Karla |
| author_facet |
Hoff, Karla |
| author_sort |
Hoff, Karla |
| title |
Dysfunctional Finance : Positive Shocks and Negative Outcomes |
| title_short |
Dysfunctional Finance : Positive Shocks and Negative Outcomes |
| title_full |
Dysfunctional Finance : Positive Shocks and Negative Outcomes |
| title_fullStr |
Dysfunctional Finance : Positive Shocks and Negative Outcomes |
| title_full_unstemmed |
Dysfunctional Finance : Positive Shocks and Negative Outcomes |
| title_sort |
dysfunctional finance : positive shocks and negative outcomes |
| publishDate |
2010 |
| url |
http://hdl.handle.net/10986/5848 |
| work_keys_str_mv |
AT hoffkarla dysfunctionalfinancepositiveshocksandnegativeoutcomes |
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1756571667742588928 |