Business fluctuations in a behavioral switching model: Gridlock effects and credit crunch phenomena in financial networks
Gabriele Tedeschi and
Mauro Gallegati ()
Journal of Economic Dynamics and Control, 2020, vol. 114, issue C
In this paper we characterize the evolution over time of a credit network in the most general terms as a system of interacting banks and firms operating in a three-sector economy with goods, credit and interbank market. Credit connections change over time via an evolving fitness measure depending from lenders’ supply of liquidity and borrowers’ demand of credit. Moreover, an endogenous learning mechanism allows agents to switch between a loyal or a shopping-around strategy according to their degree of satisfaction. The crucial question we investigate is how financial bubbles and credit-crunch phenomena emerge from the implemented mechanism.
Keywords: Business fluctuations; financial frictions; Switching behavior; Fitness model; Dynamic credit network (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:114:y:2020:i:c:s0165188918303476
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