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Credit Crunches, Asset Prices and Technological Change

Luis Araujo (), Qingqing Cao, Raoul Minetti and Pierluigi Murro ()
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Qingqing Cao: Michigan State University

Review of Economic Dynamics, 2019, vol. 32, 153-179

Abstract: We investigate the effects of a credit crunch in an economy where firms can retain a mature technology or adopt a new technology. We show that firms' collateral eases firms' access to credit and investment but can also inhibit firms' innovation. When this occurs, a contraction in the price of collateral assets squeezes collateral-poor firms out of the credit market but fosters the innovation of collateral-rich firms. The analysis reveals that the credit and asset market policies adopted during recent credit market crises can boost investment but slow down innovation. We find that the predictions of the model are consistent with the innovation patterns of a large sample of European firms during the 2008-2010 credit crisis. (Copyright: Elsevier)

Keywords: Credit crunch; Technological change; Collateral (search for similar items in EconPapers)
JEL-codes: E44 G21 G01 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Credit Crunches, Asset Prices and Technological Change (2012) Downloads
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DOI: 10.1016/j.red.2019.02.001

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