This paper shows how badly a market economy may respond to a positive productivity shock in an environment with asymmetric information about project quality: some, all, or even more than all the benefits from the increase in productivity may be dissipated. In the model, based on Bernanke and Gertler (1990), entrepreneurs with a low default probability are charged the same interest rate as entrepreneurs with a high default probability. The implicit...
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INFORMATION
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2010/01/01
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Document de travail de recherche sur les politiques
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WPS5183
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1
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1
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2010/07/01
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Disclosed
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Dysfunctional finance : positive shocks and negative outcomes
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entrepreneur
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