ABSTRACT
As demonstrated in Chapter III, the form that rationing takes significantly affects equilibrium in the credit market. If credit is rationed by restricting the size of loans rather than the number of loans, interest rates will fall as credit becomes tighter. This finding deviates from the finding of interest rate invariance for the case in which loans are rationed by number. Thus, the proposition of interest rate invariance commonly associated with the work of Stiglitz and Weiss is sensitive to the form that credit rationing takes.
