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

No wpC22, CERBE Working Papers from CERBE Center for Relationship Banking and Economics

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.

Keywords: Credit Crunch; Technological Change; Collateral (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2018-08
New Economics Papers: this item is included in nep-eur and nep-mac
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https://repec.lumsa.it/wp/wpC22.pdf (application/pdf)

Related works:
Journal Article: Credit Crunches, Asset Prices and Technological Change (2019)
Working Paper: Credit Crunches, Asset Prices and Technological Change (2012)
Working Paper: Credit Crunches, Asset Prices and Technological Change (2012)
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