 Abstract
This paper studies the possibility of endogenous fluctuations caused by activities of Financial intermediaries
. Risk-averse agents borrow from banks and invest in a risky two-state capital technology. The probability of success with the technology is assumed to be decreasing in the amount of capital invested. In a complete information setting with intermediation, the efficient loan contract achieves complete risk sharing but the amount invested in the risky project is smaller than the loan size. This
Authors:
BANERJI, Sanjay
& Bhattacharya, Joydeep & Ngo, Long V (2003)
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Can Financial Intermediation Induce Endogenous Fluctuations?
http://ideas.repec.org/p/isu/genres/10953.html
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