used for law enforcement in order to get back the funds and in most of the case there is also possibility of not taking back at all if it was an unsecured loan. The problem of credit rationing arises most if the creditor does not have anything to provide as collateral. Even if he/she is a trustworthy person and would use the funds for good investment project and able to pay back his/her debt, the lender may not lend him/her so it leads to inefficient allocation of resources. In macroeconomic perspective one of the consequences of the imperfect capital markets is insufficient investment. Since most of the time firms finance their investment from credit markets, lack of supply of funds leads to insufficient amount of investment causing inefficient allocation of funds in the economy. Even though it was true that every agent could borrow at the amount they were willing to, we could not have reached the efficient allocation because of the high market interest rate causing from the cost of screening and monitoring of the banks. Based on the fact that in real world the capital markets are far from being perfect, we can clearly say that market clearing is a very specific result which may not hold in general. Imperfections in international capital markets Enforcement of the contract is particularly difficult in an international set up. It is hard for a creditor to impose sanctions to a country that defaults. Hence, it is a much deeper problem considering the consequences of imperfections in international capital markets. It may highly reduce the country's ability to extract financial resources on international basis. the most fundamental reason is the sovereign risk that causes from the lack of a supranational legal authority, capable of enforcing contracts across borders. The main results of imperfect international capital markets are similar to domestic ones: risk and insufficient level of investment. Since the inefficiency of the economy in terms of investment is also related to the economic growth of the country, the consequences on investment and economic growth are more severe and affects the economies of the countries (especially developing countries) in macro level. References Law and economics Asymmetric information Market failure Financial markets