Boundedly rational credit cycles

Research, Preprint English OPEN
Sáez, María (1996)
  • Subject: Finance and Accounting
    mesheuropmc: education | humanities | health care economics and organizations

We propose an evolutionary model of a credit market. We show that the economy exhibits credit cycles. The model predicts dynamics which are consistent with some evidence about the Great Depression. Real shocks trigger episodes of credit--crunch which are observed in the process of adjustment towards the post shock equilibrium.
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