The Credit Market and the Determinants of Credit Crunches: An Agent Based Modeling Approach

Ulf Holmberg ()

No 836, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: This paper presents a credit market model and finds, using an agent based modeling approach, that credit crunches have a tendency to occur; even when credit markets are almost entirely transparent in the absence of external shocks. We find evidence supporting the asset deterioration hypothesis and results that emphasize the importance of accurate firm quality estimates. In addition, we find that an increase in the debt’s time to maturity, homogenous expected default rates and a conservative lending approach, reduces the probability of a credit crunch. Thus, our results suggest some up till now partially overlooked components contributing to the financial stability of an economy.

Keywords: financial stability; banking; lending; screening; truncation (search for similar items in EconPapers)
JEL-codes: C63 E51 G21 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-02-17
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.econ.umu.se/DownloadAsset.action?conten ... Id=3&assetKey=ues836 (application/pdf)

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:hhs:umnees:0836

Access Statistics for this paper

More papers in Umeå Economic Studies from Umeå University, Department of Economics Department of Economics, Umeå University, S-901 87 Umeå, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by David Skog ().