Abstract
Credit rationing is a condition of loan markets in which the lender supply of funds is less than borrower demand at the quoted contract terms. Credit rationing was briefly discussed in the context of usury ceilings by Adam Smith (1776) and was an issue in the bullion and currency controversies of 19th-century England (see Viner, 1937, pp. 256–7). Later, in his Treatise on Money, Keynes (1930, I, pp. 212–13; II, pp. 364–7) stressed the ‘fringe of unsatisified borrowers’ as a factor influencing the volume of investment. Credit rationing came to prominence in the United States after World War II as part of the ‘availability doctrine’, first developed by Roosa (1951) and others in the Federal Reserve System. The focus of the availability doctrine, like Keynes’s, is that credit rationing influences investment independently of variations in interest rates or in other factors that shift the demand schedules of borrowers.
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© 1989 Palgrave Macmillan, a division of Macmillan Publishers Limited
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Jaffee, D.M. (1989). Credit Rationing. In: Eatwell, J., Milgate, M., Newman, P. (eds) Money. The New Palgrave. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-19804-7_10
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DOI: https://doi.org/10.1007/978-1-349-19804-7_10
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