This paper empirically examines the development of credit allocation amongst Japanese small- and medium-sized enterprises (SMEs), and the relationship between credit allocation and economic efficiency. We first investigate whether the credit market is inefficient, in that the survival of...

We consider a competitive bank loan market model where the marginal costs of managing and monitoring loans are assumed to increase as borrowers' net worth decreases. We show that the responsiveness of equilibrium bank loan rates to changes in interbank money market rates become weaker as...