Prospective borrowers from commercial banks are usually made to pass through stringent lending procedure. The screening procedure is intended to forestall likely default intents and reduce credit risks. Banks, through the analysis are able to predict the inherent risk level in the loans they...

We decompose aggregate consumption by modelling both savers and their links to collateral constrained borrowers through a bank which prices credit risk. Savers own both firms and the commercial bank while borrowers require loans from the commercial bank to effect their consumption plans. The...