financial friction in the context of liquidity injections (credit expansion). We show that if too much liquidity is injected … prices, and collateral values. The paper highlights the effect of financial frictions on the allocation and distribution of … liquidity in an economy, demonstrating misallocation of liquidity (credit) in the economy under excessive liquidity injections …

bank credit reallocation with endogenous firm entry and exit that allows for both theoretical and quantitative analysis. By … also redirect existing credit to more productive entrants. This reduces banks' dependence on household deposits that are …