| Author(s): |
prof. Ing. Karel Janda M.A., Dr., Ph.D.,
|
| Type: |
IES Working Papers |
| Year: |
2008 |
| Number: |
12 |
| ISSN / ISBN: |
|
| Published in: |
IES Working Papers 12/2008 |
| Publishing place: |
Prague |
| Keywords: |
information asymmetry, credit, guarantees, subsidies |
| JEL codes: |
D82, G18, H25 |
| Suggested Citation: |
Janda, K. (2008). “ Which Government Interventions Are Good in Alleviating Credit Market Failures? ” IES Working Paper 12/2008. IES FSV. Charles University. |
| Grants: |
IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
|
| Abstract: |
Credit contracting between a lender with a market power and a small start-up entrepreneur may lead to a rejection of projects whose expected benefits are higher than their total costs when an adverse selection is present. This inefficiency may be eliminated by a government support in the form of credit guarantees or subsidies. The principal-agent model of this paper compares different forms of government support and concludes that a guarantee defined as a proportion of a gross interest rate is not a sufficiently robust policy instrument. Lump-sum guarantees and interest rate subsidies are evaluated as better instruments because they have a nonambiguous positive effect on a social efficiency since they enable funding of socially efficient projects which would not be financed otherwise. |
| Downloadable: |
WP 2008_12_Janda
|
