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Credit Termination and the Technology Bubbles

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  • Jin, Yu

Abstract

We study the role of firms' credit histories in a business cycle model. Loans are dynamic contracts between banks and firms, and credit terminations are used as an incentive device. Banks deny future loans to an entrepreneur according to his credit histories in order to affect his choice of project ex ante. This will generate fluctuations from technology shocks to the riskiness of different types of projects as occurred during the technology bubbles. The model is used to explain the boom-and-bust of the dot-com bubble, one leading example of technology bubbles in the economy, in the late 1990s.

Suggested Citation

  • Jin, Yu, 2010. "Credit Termination and the Technology Bubbles," MPRA Paper 29010, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:29010
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    References listed on IDEAS

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    More about this item

    Keywords

    credit terminations; technology bubbles;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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