Credit Traps and Credit Cycles

Kiminori Matsuyama

American Economic Review, 2007, vol. 97, issue 1, 503-516

Abstract: We develop a simple macroeconomic model of credit market imperfections with heterogeneous investment projects. The projects differ in productivity, the investment requirement, and the severity of agency problems behind the borrowing constraints. A movement in borrower net worth shifts the composition of the credit between projects with different productivity levels, thereby causing endogenous investment-specific technological change. Furthermore, such endogenous technological change in turn affects borrower net worth. These composition effects could give rise to credit traps, credit collapse, leapfrogging, credit cycles, and growth miracles in the dynamics of the aggregate investment and borrower net worth. (JEL E22, E44, O33)

Date: 2007
Note: DOI: 10.1257/aer.97.1.503
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (171)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.1.503 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:97:y:2007:i:1:p:503-516

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().