Template-Type: ReDIF-Paper 1.0
Author-Name: Luis Araujo 
Author-X-Name-First: Luis
Author-X-Name-Last: Araujo
Author-Email: araujolu@msu.edu
Author-Workplace-Name: Michigan State University 
Author-Name: Qingqing Cao 
Author-X-Name-First: Qingqing
Author-X-Name-Last: Cao
Author-Email: caoqq@msu.edu
Author-Workplace-Name: Michigan State University 
Author-Name: Raoul Minetti 
Author-X-Name-First: Raoul
Author-X-Name-Last: Minetti
Author-Email: minetti@msu.edu
Author-Workplace-Name: Michigan State University
Author-Name: Pierluigi Murro 
Author-X-Name-First: Pierluigi
Author-X-Name-Last: Murro
Author-Email: pmurro@luiss.it
Author-Workplace-Name: LUISS University 
Title: Credit crunches, asset prices, and technological change

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. 
Length: 60 pages
Creation-Date: 2018-08
Publication-Status: 
File-URL: https://repec.lumsa.it/wp/wpC22.pdf
File-Format: Application/pdf
Number: wpC22
Classification-JEL: E44; G21; G01
Keywords: Credit Crunch, Technological Change, Collateral
Handle: RePEc:lsa:wpaper:wpC22