Credit cycles: Experimental evidence

Baptiste Massenot ()

No 104 [rev.], SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Credit boom-busts are observed in experimental credit markets with perfect information, no aggregate shocks, and no speculative motive. By contrast, a stable outcome is observed in the island economy, which isolates the borrowers but is otherwise similar to the market economy. The higher willingness to pay for credit following higher market but not island interest rates is consistent with herding, which can create spiraling effects and predict a credit boom-bust.

Date: 2020, Revised 2020
New Economics Papers: this item is included in nep-exp and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:104r

DOI: 10.2139/ssrn.2607869

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