Abstract
In a model of the lending relationship incorporating both adverse selection and moral hazard, we show that increasing the liability of lenders for environmental damage done by their borrowers has a qualitatively ambiguous impact upon interest rates. This calls into question the assertion of financial community representatives that such reform will necessarily driveup interest rates and have adverse macroeconomic consequences. If it is this fear which is preventing reform then that reluctance may, in the case of many classes of pollutant, be misplaced. The implications of such reform for credit-rationing are also explored.
Original language | English |
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Title of host publication | Economics and Liability for Environmental Problems |
Publisher | Taylor and Francis |
Pages | 231-244 |
Number of pages | 14 |
ISBN (Electronic) | 9781315188133 |
ISBN (Print) | 9781138730632 |
Publication status | Published - 12 Jan 2018 |
Bibliographical note
Publisher Copyright:© Kathleen Sagerson 2002.
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- General Business,Management and Accounting