Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
965444 | Journal of Macroeconomics | 2013 | 10 Pages |
Abstract
We explain the large observed volatility of commercial and industrial loans as a Markov equilibrium of an economy with limited commitment in which all credit is unsecured and self-enforcing. Aggregate income growth shocks affect gains from future asset market trading, inducing fluctuations in credit limits. The economy alternates between a high state of well diversified idiosyncratic risks and a “credit crunch” state of low debt limits and poor diversification.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Costas Azariadis, Kyoung Jin Choi,