Unformatted text preview: granted bank ﬁnance (from informed intermediaries which monitor the ﬁrm). How much intermediary ﬁnance would the ﬁrm be offered? (d) For A = A obtain the payoff on the ﬁrm’s own (initial) capital. (e) Interpret the ﬁnancing decision of a ﬁrm (direct and indirect) for a ﬁrm with initial capital in the range A < A < A . 3. Using the market equilibrium conditions in the HT model, explain the implications of the following: (a) A collateral squeeze (i.e., a fall in the aggregate amount of ﬁrms’ initial capital). (b) A savings squeeze (i.e., a reduction in uninformed investors’ saving at each bond rate of interest). *****...
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- Spring '12
- Economics, ht, initial capital