Munich Personal RePEc Archive

Credit Termination and the Technology Bubbles

Jin, Yu (2010): Credit Termination and the Technology Bubbles.

[img]
Preview
PDF
MPRA_paper_29010.pdf

Download (235Kb) | Preview

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.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.