Khwaja, Asim IjazMian, AtifZia, Bilal2012-03-302012-03-302010Review of Financial Studies08939454https://hdl.handle.net/10986/4630We exploit an unexpected inflow of liquidity in an emerging market to study how capital is intermediated to firms. We find that backward-looking credit limit constraints imposed by banks make it difficult for firms to borrow, despite readily available bank liquidity, healthy aggregate demand, and a sharply falling cost of capital. The resulting aggregate failure to extend and retain capital in the economy suggests that agency costs that force banks to rely on sticky balance-sheet-based credit limits prevent emerging economies from effectively intermediating capital.ENCapitalInvestmentCapacity E220Financial Markets and the Macroeconomy E440BanksOther Depository InstitutionsMicro Finance InstitutionsMortgages G210Economic Development: Financial MarketsSaving and Capital InvestmentCorporate Finance and Governance O160International Linkages to DevelopmentRole of International Organizations O190Dollars Dollars Everywhere, nor Any Dime to Lend : Credit Limit Constraints on Financial Sector Absorptive CapacityReview of Financial StudiesJournal ArticleWorld Bank