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Do Banks Ration Credit to New Enterprises? And Should Governments Intervene?
Author(s) -
Parker Simon C.
Publication year - 2002
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/1467-9485.00227
Subject(s) - credit rationing , presumption , loan , rationing , credit reference , economics , government (linguistics) , economic interventionism , intervention (counseling) , credit history , credit enhancement , phenomenon , business , credit crunch , finance , financial system , credit risk , interest rate , economic growth , law , political science , psychology , health care , linguistics , philosophy , physics , quantum mechanics , psychiatry , politics
Do banks deny credit to new start–ups? The presumption that they do has motivated government intervention in several forms, including publicly backed loan guarantee schemes in the UK and elsewhere. This paper presents an overview of the modern theory and evidence of credit rationing, and concludes that the case for credit rationing is weak. Ultimately, theoretical arguments for or against credit rationing are inconclusive, so evidence is needed to decide the issue. The evidence is not supportive of the view that credit rationing is an important or widespread phenomenon.