Presence of nominal rigidity as an important part of macroeconomic theory since. Definition of debt rigidity; its impact on crediting. The causes of the Japanese economic crisis; way out of it. Banking problems in United States and euro area countries.
Debt rigidity can be expressed in the following way: though income and asset price of economic agents are flexible and decrease during recession, their debts don’t decline. To make real sector more flexible and able to adjust quickly and adequately to the shocks, companies’ liabilities similarly to income and assets price should be flexible. Profit participating financing will strengthen stability of banks too as money attracted by banks are not debt but trust account or money transferred to bank in trust. It can be seen in Japan where, on the one hand the companies, because of the fear that incomes and value of assets in the future will be insufficient for repayment of debts, reduce demand for credits. In case individual"s assets (capital or financial assets) are financed through debt, debtors’ ability to fulfill debt depends not only on debtors’ income, but on asset price too.Similarly to wage and price rigidity debt rigidity restricts flexibility of markets and makes them unable to adjust quickly and adequately to the shocks in economy. To make real sector more flexible and resistant to shocks, companies’ liabilities similarly to income and assets price should be flexible. Profit participating financing will strengthen stability of banks too as money attracted by banks are not debt but trust account or money transferred to bank in trust.
Вывод
Similarly to wage and price rigidity debt rigidity restricts flexibility of markets and makes them unable to adjust quickly and adequately to the shocks in economy. To make real sector more flexible and resistant to shocks, companies’ liabilities similarly to income and assets price should be flexible. Liability flexibility can be provided by profit/loss sharing. Profit participating financing will strengthen stability of banks too as money attracted by banks are not debt but trust account or money transferred to bank in trust.
Debt rigidity negatively influences lending too. On the one hand the companies, because of the fear to face insolvency on loans, reduce demand for credits. On the other hand banks also because of risks to face insolvency to depositors tighten the requirements for debtors. Thus the reluctance of both firms to borrow and banks to lend may be overcome by profit participating financing.
Debt rigidity problem is urgent for US and European countries too. Taking into consideration near-zero interest rate in US and euro area it is obvious that expected rise in interest rate will decrease the value of securities banks hold and so will provoke banking crisis.
Список литературы
1. Koo, R. 2011. The world in balance sheet recession: causes, cure, and politics. Real-world economics review, issue no. 58, pp. 19-37
2. Minsky, H. 1980. Capitalist Financial processes and the instability of Capitalism. Journal of Economic Issues, No. 2, pp. 505-523
3. Mises, L. 1912. The Theory of Money and Credit
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