arXiv subjects

Joseph E. Stiglitz

Publications and source records attributed to Joseph E. Stiglitz.

3 recordsLinked to original sources

arXiv2026

Credit Expansion, Land Speculation, and Low-Interest-Rate Policy

This paper analyses the impact of credit expansions arising from decreases in collateral requirements or more expansionary monetary policies on long-term productivity in a model with endogenous growth. Credit expansions associated with relaxation of land collateral financing (capital collateral financing) will be productivity-and growth-retarding (enhancing). Without appropriate financial regulation, expansionary monetary policy may so encourage land speculation using leverage that productive capital investment is decreased; there is a temporary asset boom, but slower economic growth. The generation that experienced the asset price boom is better off, but subsequent generations are worse off because of low growth.

econ.TH↗

arXiv2024

Credit, Land Speculation, and Long-Run Economic Growth

This paper presents a model that studies the impact of credit expansions arising from increases in collateral values or lower interest rate policies on long-run productivity and economic growth in a two-sector endogenous growth economy, with the driver of growth lying in one sector (manufacturing) but not in the other (real estate). We show that it is not so much aggregate credit expansion that matters for long-run productivity and economic growth but sectoral credit expansions. Credit expansions associated mainly with relaxation of real estate financing (capital investment financing) will be productivity-and growth-retarding (enhancing). Without financial regulations, low interest rates and more expansionary monetary policy may so encourage land speculation using leverage that productive capital investment and economic growth are decreased. Unlike in standard macroeconomic models, in ours, the equilibrium price of land will be finite even if the safe rate of interest is less than the rate of output growth.

econ.TH↗

arXiv2010

Business fluctuations in a credit-network economy

We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network connections. Credit interlinkages among agents are a source of bankruptcy diffusion: in fact, failure of fulfilling debt commitments would lead to bankruptcy chains. All in all, the bankruptcy in one sector can diffuse to other sectors through linkages creating a vicious cycle and bankruptcy avalanches in the network economy. Our analysis show how the choices of credit supply by both banks and firms are interrelated. While the initial impact of monetary policy is on bank behaviour, we show the interactive play between the choices made by banks, the choices made by firms in their role as providers of credit, and the choices made by firms in their role as producers.

q-fin.GN↗