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Banks Nonperforming Loans and Financial Accelerator

Soleimani, Reza | 2017

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 50855 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Madanizadeh, Ali; Mahmoudzadeh, Amineh
  7. Abstract:
  8. This study examines the real consequences of credit market frictions in quantitative and qualitative terms in the framework of a dynamic general equilibrium model. In the form of a macrofinance model in which the asymmetric information between the bank and the firm and the weakness in the implementation of the contracts forms the relationship between the lender and the borrower, and the firm is able to strategically decide on default, we have analyzed the market equilibrium and the effect of credit market conditions on different markets. The findings of this study indicate that in such an economy, the decision of borrowers to voluntary default will reduce public welfare, cause a poor distribution of resources among firms, and reduce the overall productivity of the economy, as an endogenous variable and function of characteristics of financial market. The model is developed by defining the share of the accessable wealth of firm to the bank in the event of default of the firm, as the amount of contract enforcement, and the share of cost of firms from total wealth of the firm, if hide from the economy, as hiding cost.This study shows that increasing the contract enforcement will increase the welfare and average productivity of the whole economy. In contrast, with the increase in the cost of hiding, despite the increase in production level and overall welfare, because of increase in total cost of the economy, average productivity of the economy decreases
  9. Keywords:
  10. Financial Friction ; Asymmetric Information ; General Equilibruim Model ; Strategic Default ; Non-Performing Loans ; Financial Accelerator

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