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Please use this identifier to cite or link to this item: http://hdl.handle.net/10400.5/1735

Title: Unlearned lessons from risk, debt service, bank credit and asymmetric information
Authors: Ibrahimo, Muradali V.
Barros, Carlos Pestana
Keywords: Asymmetric information
Bank credit
Risk
Debt service
Business cycle
Issue Date: 2009
Publisher: ISEG – Unidade de Estudos sobre a Complexidade em Economia
Citation: Ibrahimo, Muradali V., Carlos Pestana Barros. 2009. "Unlearned lessons from risk, debt service, bank credit and asymmetric information". Instituto Superior de Economia e Gestão - DE Working papers ; 43-2009/DE/UECE
Series/Report no.: Working papers; 43/2009/DE/UECE
Abstract: This paper presents a model of the economy that explains the economic bubbles, based on bank credit, debt service and risk. In the first period of the model, banks offer too much credit seeking to maximise their expected profits. The excessive debt created in the boom period generates, in the second-period, the expansion of the debt bubble, which induces failures in the financial market and the downturn of the overall economy. Business cycles are inherent in the free market systems. They may be caused by endogenous factors of financial markets and, given the absence of adequate, effective regulation, they may be unavoidable. Credit crunch in the financial market is therefore highly probable. In order to reduce substantially the risk of such occurrences, economic and financial policies are proposed.
URI: http://hdl.handle.net/10400.5/1735
ISSN: 0874-4548
Appears in Collections:UECE - Documentos de Trabalho / UECE - Working Papers
DE - Documentos de trabalho / Working Papers

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