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.
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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
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