Credit rationing is a common feature of most developing economies. In response to it, the governments of these … countries often operate extensive credit programs and lend, either directly or indirectly, to the private sector. We analyze the … macroeconomic consequences of a typical government credit program in a small open economy. We show that such programs increase long …

expectations. A bank collapse multiplies the harmful effects of an initial shock, as a credit squeeze and costly liquidation of …

-Dybvig model. The banking system, the exchange rate regime, and central bank credit policy are seen as parts of a mechanism …