Schumpeterian Banks: Credit Reallocation and Capital Requirements

Item Type Monograph (Discussion Paper)
Abstract Capital reallocation from unprofitable to profitable firms is a key source of productivity gain in an innovative economy. We present a model of credit reallocation and focus on the role of banks: Weakly capitalized banks hesitate to write off non-performing loans to avoid a violation of regulatory requirements or even insolvency. Such behavior blocks credit to expanding industries and results in insufficient credit reallocation across sectors and a distorted capital allocation. Reducing the cost of bank equity, tightening capital requirements, and improving insolvency laws relaxes constraints and mitigates distortions.
Authors Keuschnigg, Christian & Kogler, Michael
Language English
Subjects economics
Date February 2017
Place of Publication University of St Gallen
Depositing User Dr. Mirela Keuschnigg
Date Deposited 06 Mar 2017 14:08
Last Modified 20 Jul 2022 17:30



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Keuschnigg, Christian & Kogler, Michael: Schumpeterian Banks: Credit Reallocation and Capital Requirements. 2017,

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