Credit Crunches, Asset Prices and Technological Change
AbstractWe investigate the effects of a credit crunch in an economy where firms can operate a mature technology or restructure their activity and adopt a new technology. We show that firms’ collateral and credit relationships ease firms’ access to credit and investment but can also inhibit firms’ restructuring. When this occurs, negative collateral or productivity shocks and the resulting drop in the price of collateral assets squeeze collateral-poor firms out of the credit market but foster the restructuring of collateral-rich firms. We characterize conditions under which such an increase in firms’ restructuring occurs within existing credit relationships or through their breakdown. The analysis reveals that the credit and asset market policies adopted during the recent credit crunch can promote investment but might also slow down a process of Shumpeterian restructuring in the credit market.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers CASMEF with number 1204.
Date of creation: 2012
Date of revision:
Aggregate restructuring; Collateral; Credit relationships; Credit crunch.;
Other versions of this item:
- Luis Araujo & Raoul Minetti, 2012. "Credit Crunches, Asset Prices and Technological Change," Mo.Fi.R. Working Papers 61, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Luigi Guiso & Raoul Minetti, 2010.
"The Structure of Multiple Credit Relationships: Evidence from U.S. Firms,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 42(6), pages 1037-1071, 09.
- Luigi Guiso & Raoul Minetti, 2007. "The Structure of Multiple Credit Relationships: Evidence from US Firms," Economics Working Papers ECO2007/46, European University Institute.
- Giovanni Dell'Ariccia & Pietro Garibaldi, 2005.
"Gross Credit Flows,"
Review of Economic Studies,
Oxford University Press, vol. 72(3), pages 665-685.
- Raghuram G. Rajan & Luigi Zingales, 2001. "Financial Systems, Industrial Structure, and Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 467-482.
- Manove, M. & Padilla, A.J., 1997.
"Banking (Conservatively) with Optimists,"
9718, Centro de Estudios Monetarios Y Financieros-.
- Giovanni Dell'Ariccia & Pietro Garibaldi, 1998. "Bank Lending and Interest Rate Changes in a Dynamic Matching Model," IMF Working Papers 98/93, International Monetary Fund.
- Holmström, Bengt & Tirole, Jean, 1994.
"Financial Intermediation, Loanable Funds and the Real Sector,"
IDEI Working Papers
40, Institut d'Économie Industrielle (IDEI), Toulouse.
- Holmstrom, Bengt & Tirole, Jean, 1997. "Financial Intermediation, Loanable Funds, and the Real Sector," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 663-91, August.
- Bengt Holmstrom & Jean Tirole, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," Working papers 95-1, Massachusetts Institute of Technology (MIT), Department of Economics.
- Manove, Michael & Padilla, A Jorge & Pagano, Marco, 2001. "Collateral versus Project Screening: A Model of Lazy Banks," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 726-44, Winter.
- Mitchell Berlin & Alexander Butler, 2002. "Collateral and competition," Working Papers 02-22, Federal Reserve Bank of Philadelphia.
- Bhattacharya Sudipto & Chiesa Gabriella, 1995. "Proprietary Information, Financial Intermediation, and Research Incentives," Journal of Financial Intermediation, Elsevier, vol. 4(4), pages 328-357, October.
- Caterina Mendicino, 2012. "Collateral Requirements: Macroeconomic Fluctuations and Macro-Prudential Policy," Working Papers w201211, Banco de Portugal, Economics and Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stefano Marzioni).
If references are entirely missing, you can add them using this form.