Credit rationing with an individual short-side rule : estimation for business loans in Canada
department or school: Arts, Faculty of
department or school: Vancouver School of Economics
data provider: DSpace
degree campus: UBCV
creator: Crawford, Allan Charles
issued: 2010-07-31T23:05:41Z
issued: 1985
related degree: Doctor of Philosophy - PhD
degree grantor: University of British Columbia
description: It is generally accepted that rationing occurs in loan markets with demand of some borrowers exceeding desired supply by lenders at prevailing interest rates. Previous empirical studies of credit rationing use established disequilibrium econometric methods to estimate structural models of business loan markets. This study argues that existing disequilibrium techniques are not suitable for analyzing credit rationing since they ignore features of loan markets emphasized in the theoretical literature. While recent theory distinguishes between equilibrium and disequilibrium categories of credit rationing, existing empirical work allows only the latter to exist. In addition the traditional empirical model does not derive loan equations from micro foundations despite a theoretical focus on loan determination at the individual borrower level. Instead, equations are constructed by assuming aggregate loan quantity corresponds to the minimum of aggregate supply and demand. These inconsistencies with theory suggest that estimates of rationing from the traditional model are unreliable. Unlike traditional methods the empirical model developed in this study derives aggregate equations from a micro approach to loan determination. Individual loan sizes are determined by the minimum of borrower-specific supply and demand functions and explicit aggregation across all borrowers gives estimating equations with desired properties. An attractive feature of the new model is that it yields the first estimates of equilibrium credit rationing. This allowance for both equilibrium and disequilibrium rationing, together with the micro foundations, means that the proposed model provides greater consistency between theoretical and applied work than has been previously possible. The new model is applied to the market for business loans from Canadian banks for the period 1968 to 1979. Results indicate that rationing is empirically significant as total rationing averages approximately one-third of a…
aggregated CHO: https://circle.library.ubc.ca/rest/handle/2429/27060
note: CREDIT RATIONING WITH AN INDIVIDUAL SHORT-SIDE RULE ESTIMATION FOR BUSINESS LOANS IN CANADA by ALLAN CHARLES CRAWFORD B.A., Queen's University, 1977 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY i n THE FACULTY OF GRADUATE STUDIES (Department of Economics) We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA December 1985 © A l l a n Charles Crawford, 1985 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of Economics The University of British Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date February 27, 1986 A B S T R A C T It i s g e n e r a l l y accepted that rationing occurs i n loan markets with demand of some borrowers exceeding desired supply by lenders at p r e v a i l i n g i n t e r e s t r a t e s . P r e v i o u s e m p i r i c a l s t u d i e s of c r e d i t r a t i o n i n g use e s t a b l i s h e d d i s e q u i l i b r i u m econometric methods to estimate s t r u c t u r a l models of business l o a n markets. This study argues that e x i s t i n g d i s e q u i l i b r i u m techniques are not s u i t a b l e f o r analyzing c r e d i t rationing since they ignore features of loan markets emphasized i n the t h e o r e t i c a l l i t e r a t u r e . While recent theory d i s t i n g u i s h e s between e q u i l i b r i u m and d i s e q u i l i b r i u m c a t e g o r i e s of c r e d i t r a t i o n i n g , e x i s t i n g e m p i r i c a l work a l l o w s o n l y the l a t…
has type: Thesis/Dissertation
is shown at: 10.14288/1.0097026
language: eng
degree discipline: Economics
provider: Vancouver : University of British Columbia Library
publisher: University of British Columbia
rights: For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use.
scholar level: Graduate
type: Text
identifier URI: http://hdl.handle.net/2429/27060