Jin, Yu (2010): Credit Termination and the Technology Bubbles.
Download (241kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Credit Termination and the Technology Bubbles|
|Keywords:||credit terminations; technology bubbles|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||Yu Jin|
|Date Deposited:||28. Feb 2011 14:26|
|Last Modified:||30. Dec 2015 20:20|
Abreu, Dilip, and Markus K. Brunnermeier, "Bubbles and Crashes," Econometrica, 71 (2003), 173-204.
Bernanke, Ben, and Mark Gertler, "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, 79 (1989), 14-31.
Brunnermeier, Markus K., and Stefan Nagel, "Hedge Funds and the Technology Bubble," Journal of Finance, 59 (2004), 2013-2040.
Brynjolfsson, Erik, and Lorin M. Hitt, "Information Technology as a Factor of Production: The Role of Differences Among Firms," Economics of Innovation and New Technology, 3 (1995), 183-200.
David, Paul A., "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review Papers and Proceedings, 80 (1990), 355-361.
Diamond, Douglas W., "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, 51 (1984), 393-414.
Fama, Eugene F., "The Behavior of Stock-Market Prices," Journal of Business, (1965), 38, 34-105.
Gertler, Mark, "Financial Capacity and Output Fluctuations in an Economy with Mult-Period Financial Relationships," Review of Economic Studies, 59 (1992), 455-472.
Gordon, Robert J., "New Economy Measure up to the Great Inventions of the Past," Journal of Economic Perspectives, 14 (2000), 49-74.
Innes, Robert D., "Limited Liability and Incentive Contracting with Ex-ante Action Choices," Journal of Economic Theory, 52 (1990), 45-67.
James, Christopher, "Some Evidence on the Uniqueness of Bank Loans," Journal of Financial Economics, 19 (1987), 217-235.
Kiyotaki, Nobuhiro, and John Moore, "Credit Cycles," Journal of Political Economy, 105 (1997), 211-248.
Lamont, Owen A., and Richard H. Thaler, "Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs," Journal of Political Economy, 111 (2003), 227-268.
Mirrlees, James A., "The Theory of Moral Hazard and Unobservable Behavior: Part I," Review of Economic Studies, 66 (1999), 3-21.
Noe, Thomas, and Geoffrey Parker, "Winner Take All: Competition, Strategy, and the Structure of Returns in the Internet Economy," Journal of Economics and Management Strategy, 14 (2005), 141-164.
Ofek, Eli, and Matthew Richardson, "DotCom Mania: The Rise and Fall of Internet Stock prices," Journal of Finance, 58 (2003), 1113-1137.
Scheinkman, Jose A., and Laurence Weiss, "Borrowing Constraints and Aggregate Economic Activity," Econometrica, 54 (1986), 23-45.
Shleifer, Andrei, and Robert W. Vishny, "Limits of Arbitrage," Journal of Finance, 52 (1997), 35-55.
Smith, Anthony A., and Cheng Wang, "Dynamic Credit Relationship in General Equilibrium," Journal of Monetary Economics, 53 (2006), 847-877.
Spear, Stephen E., and Sanjay Srivastava, "On Repeated Moral Hazard with Discounting," Review of Economic Studies, 54 (1987), 599-617.
Spear, Stephen E., and Cheng Wang, "When to Fire a CEO: Optimal Termination in Dynamic Contracts," Journal of Economic Theory, 120 (2005), 239-256.
Stiglitz, Joseph E., and Andrew Weiss, "Incentive Effects of Termination: Applications to the Credit and Labor Markets," American Economic Review, 73 (1983), 912-927.
Williamson, Stephen D., "Financial Intermediation, Business Failures, and Real Business Cycles," Journal of Political Economy, 95 (1987), 1196-1216.