ABSTRACT
Research on the microeconomics of equilibrium credit rationing in the late 1970s and the 1980s focuses on the role of a particular market imperfection, asymmetric information, in explaining non-price rationing of loans. Research on the macroeconomic implications of credit rationing mainly concerns the role of credit markets in the determination of aggregate demand and in the monetary transmission mechanism. Two general directions are evident in the literature. The first involves reconsideration of the monetary transmission mechanism within the traditional Keynesian framework. In contrast, the second direction concerns the role played by credit market imperfections in the monetary transmission process in the absence of Keynesian rigidities. Bernanke and Blinder provide both theoretical arguments and empirical evidence for the growing importance of credit shocks in explaining the real economy. They develop a variant of the IS/LM model that allows for both money and credit and highlights the real effects of credit-supply shocks.
