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  E-mail Message: I thought you might be interested in this item at http://www.worldcat.org/oclc/58801991 Title: Do firms want to borrow more? : testing credit constraints using a directed lending program Author: Abhijit V Banerjee; Esther Duflo; Massachusetts Institute of Technology. Department of Economics Publisher: Cambridge, Mass. : Massachusetts Institute of Technology, Dept. of Economics, [2002] OCLC:58801991

  
  

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Do firms want to borrow more? : testing credit constraints using a directed lending program

Author:	Abhijit V Banerjee; Esther Duflo; Massachusetts Institute of Technology. Department of Economics.
Publisher:	Cambridge, Mass. : Massachusetts Institute of Technology, Dept. of Economics, [2002]
Series:	Working paper (Massachusetts Institute of Technology. Department of Economics), no. 02-25.
Edition/Format:	Print book : EnglishView all editions and formats
Summary:	We begin the paper by laying out a simple methodology that allows us to determine whether firms are credit constrained, based on how they react to changes in directed lending programs. The basic idea is that while both constrained and unconstrained firms may be willing to absorb all the directed credit that they can get (because it may be cheaper than other sources of credit), constrained firms will use it to expand production, while unconstrained firms will primarily use it as a substitute for other borrowing. We then apply this methodology to firms in India that became eligible for directed credit as a result of a policy change in 1998. Using firms that were already getting this kind of credit before 1998 to control for time trends, we show that there is no evidence that directed credit is being used as a substitute for other forms of credit. Instead the credit was used to finance more production - there was significant acceleration in the rate of growth of sales and profits for these firms. We conclude that many of the firms must have been severely credit constrained. Keywords: Banking, Credit Constraints, India. JEL Classifications: O16, G2.  Read more...
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Subjects	Commercial credit. Bank loans. Credit control. View all subjects
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