Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/23418
Authors: 
Behr, Patrick
Lee, Samuel
Year of Publication: 
2005
Series/Report no.: 
Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting 153
Abstract: 
We derive the effects of credit risk transfer (CRT) markets on real sector productivity and on the volume of financial intermediation in a model where banks choose their optimal degree of CRT and monitoring. We find that CRT increases productivity in the up-market real sector but decreases it in the low-end segment. If optimal, CRT unambiguously fosters financial deepening, i.e., it reduces creditrationing in the economy. These effects rely upon the ability of banks to commit to the optimal CRT at the funding stage. The optimal degree of CRT depends on the combination of moral hazard, general riskiness, and the cost of monitoring in nonmonotonic ways.
Subjects: 
credit risk transfer
delegated monitoring
financial deepening
JEL: 
G32
G21
D82
Document Type: 
Working Paper

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