Credit rationing by loan size in commercial loan markets

The authors present a theoretical model in which a profit-maximizing lender may ration credit to businesses by restricting loan size. Such credit rationing occurs despite the absence of differences across borrowers in default risk or loan administration costs. Moreover, the model predicts an interest rate-loan size pattern that matches that observed in U.S. commercial loan markets.Credit ; Bank loans

Risky Banking: Optimal Loan Quantity and Portfolio Quality Choices

In this paper we construct a model of a "risky bank". The bank faces excess demand in the loan market, can sort loan applicants by an observable measure of quality, and faces a small but positive probability of default on its loan portfolio. The bank uses two policies to allocate credit: - Tighten restrictions on loan quality - Limit the number of loans of a given quality We show that the level of default risk and other structural conditions have important e®ects on the market for loanable funds and the bank's optimal policies (loan rates, deposit rates, and lending standards). The structural conditions that we examine are monitoring costs, returns on alternative investments, firms' minimum funding requirements, and the level of the reserve requirement. The model provides insight into several stylized facts observed in loan markets, especially in developing countries.Facultad de Ciencias Económica

Risky Banking: Optimal Loan Quantity and Portfolio Quality Choices

In this paper we construct a model of a "risky bank". The bank faces excess demand in the loan market, can sort loan applicants by an observable measure of quality, and faces a small but positive probability of default on its loan portfolio. The bank uses two policies to allocate credit: - Tighten restrictions on loan quality - Limit the number of loans of a given quality We show that the level of default risk and other structural conditions have important e®ects on the market for loanable funds and the bank's optimal policies (loan rates, deposit rates, and lending standards). The structural conditions that we examine are monitoring costs, returns on alternative investments, firms' minimum funding requirements, and the level of the reserve requirement. The model provides insight into several stylized facts observed in loan markets, especially in developing countries.Facultad de Ciencias Económica

Bioencapsulation and Colonization Characteristics of Lactococcus lactis subsp. lactis CF4MRS in Artemia franciscana: a Biological Approach for the Control of Edwardsiellosis in Larviculture

Predominance of beneficial bacteria helps to establish a healthy microbiota in fish gastrointestinal system and thus to reduce emerging pathogen. In this study, the colonization efficacy of Lactococcus lactis subsp. lactis CF4MRS in Artemia franciscana and its potential as a probiotic in suppressing Edwardsiella sp. infection were investigated in vivo. The colonization extent of the bioencapsulated L. lactis was established through visualization of gfp gene-transformed L. lactis in A. franciscana. Here, we demonstrate that when A. franciscana is administrated with L. lactis at 108 CFU mL−1 for 8 h, the highest relative percentage of survival (RPS = 50.0) is observed after inoculation with Edwardsiella sp. The total counts of L. lactis entrapped in Artemia were the highest (ranged from 3.2 to 5.1 × 108 CFU mL−1), when 108–109 CFU mL−1 of L. lactis was used as starting inoculum, with the bioencapsulation performed within 8–24 h. Fluorescent microscopy showed gfp-transformed L. lactis colonized the external trunk surfaces, mid-gut and locomotion antennules of the A. franciscana nauplii. These illustrations elucidate the efficiency of colonization of L. lactis in the gastrointestinal tract and on the body surfaces of Artemia. In conclusion, L. lactis subsp. lactis CF4MRS shows a good efficacy of colonization in Artemia and has the potential for biocontrol/probiotic activity against Edwardsiella sp. infection

An apoplastic peptide signal activates salicylic acid signalling in maize

Control of plant pathogen resistance or susceptibility largely depends on the promotion of either cell survival or cell death. In this context, papain-like cysteine proteases (PLCPs) regulate plant defence to drive cell death and protection against biotrophic pathogens. In maize (Zea mays), PLCPs are crucial in the orchestration of salicylic acid (SA)-dependent defence signalling. Despite this central role in immunity, it remains unknown how PLCPs are activated, and which downstream signals they induce to trigger plant immunity. Here, we present the discovery of an immune signalling peptide, Zea mays immune signalling peptide 1 (Zip1). A mass spectrometry approach identified the Zip1 peptide being produced after salicylic acid (SA) treatment. In vitro studies using recombinant proteins demonstrate that PLCPs are required to release bioactive Zip1 from its propeptide precursor (PROZIP1). Strikingly, Zip1 treatment strongly elicits SA accumulation in maize leaves. Moreover, RNAseq based transcriptome analyses revealed that Zip1 and SA treatments induce highly overlapping transcriptional changes. Consequently, Zip1 promotes the infection of the necrotrophic pathogen Botrytis cinerea in maize, while it reduces virulence of the biotrophic fungus Ustilago maydis. Together, Zip1 represents the previously missing signal that is released by PLCPs to activate SA defence signalling

Discount factors and thresholds: Foreign investment when enforcement is imperfect

We consider a model that provides insight into the well-known Folk theorem in economics that when the discount factor beta is sufficiently close to 1, expropriation will never occur. Although this Folk theorem is true in our model, our perspective is different. The discount factor beta often is described as a "deep structural parameter" that is difficult to alter at a point in time. In contrast, we analyze the determinants of two thresholds and beta* that segment the unit interval on which beta is defined into three subintervals. These subintervals correspond to the three possible equilibria for investment flows: autarky, underinvestment, and unconstrained optimal investment. These thresholds are of interest because they can be altered by specific policy interventions. As a consequence, even if beta is small, some level of foreign investment can be supported. We construct measures of beta for 40 countries, characterize and beta*, and discuss recent trends in investment flows

Imperfect enforcement, foreign investment, and foreign aid

The lack of a supranational legal authority that can enforce private contracts across borders makes debt repayment in an international setting contingent on borrowers' willingness to pay rather than ability to pay. This market failure (i.e., inadequate enforcement) causes investment to fall short of its unconstrained level. This paper examines how foreign aid affects a country's willingness to honor private investment agreements. We consider two types of aid: technical assistance and loan subsidies. We show that when enforcement is inadequate, aid has the following effects: (i) it reduces default risk, promotes capital flows, and can, in principle, restore investment to its unconstrained level; (ii) when default risk is high, aid can increase the welfare of both the recipient and the donor country. Thus, foreign aid serves as an enforcement mechanism in an international setting. This provides a nonaltruistic rationale for foreign aid. Finally, we discuss the implications of providing bilateral versus multilateral aid (e.g., by individual countries versus multilateral organizations)

Risky Banking: Optimal Loan Quantity and Portfolio Quality Choices

In this paper we construct a model of a "risky bank". The bank faces excess demand in the loan market, can sort loan applicants by an observable measure of quality, and faces a small but positive probability of default on its loan portfolio. The bank uses two policies to allocate credit: - Tighten restrictions on loan quality - Limit the number of loans of a given quality We show that the level of default risk and other structural conditions have important e®ects on the market for loanable funds and the bank's optimal policies (loan rates, deposit rates, and lending standards). The structural conditions that we examine are monitoring costs, returns on alternative investments, firms' minimum funding requirements, and the level of the reserve requirement. The model provides insight into several stylized facts observed in loan markets, especially in developing countries.Facultad de Ciencias Económica

Optimal contracts when enforcement is a decision variable

Abstract This paper analyzes choice-theoretic costly enforcement in an intertemporal contracting model with a differentially informed investor and entrepreneur. An intertemporal contract is modeled as a mechanism in which there is limited commitment to payment and enforcement decisions. The goal of the analysis is to characterize the effect of choice-theoretic costly enforcement on the structure of optimal contracts. The paper shows that simple debt is the optimal contract when commitment is limited and costly enforcement is a decision-variable (Theorem 1). In contrast, stochastic contracts are optimal when agents can commit to the ex-ante optimal decisions (Theorem 2). The paper also shows that the Costly State Verification model can be viewed as a reduced form of an enforcement model in which agents choose payments and strategies as part of a Perfect Bayesian Nash Equilibrium