Credit Cycles: Experimental Evidence

SAFE Working Paper No. 104

25 Pages Posted: 19 May 2015 Last revised: 16 Apr 2020

See all articles by Baptiste Massenot

Baptiste Massenot

University of Toulouse - Toulouse Business School

Date Written: April 7, 2020

Abstract

Credit boom-busts are observed in experimental credit markets with perfect information, no aggregate shocks, and no speculative motive. By contrast, a stable outcome is observed in the island economy, which isolates the borrowers but is otherwise similar to the market economy. The higher willingness to pay for credit following higher market but not island interest rates is consistent with herding, which can create spiraling effects and predict a credit boom-bust.

Suggested Citation

Massenot, Baptiste, Credit Cycles: Experimental Evidence (April 7, 2020). SAFE Working Paper No. 104, Available at SSRN: https://ssrn.com/abstract=2607869 or http://dx.doi.org/10.2139/ssrn.2607869

Baptiste Massenot (Contact Author)

University of Toulouse - Toulouse Business School ( email )

20, bd Lascrosses
BP 7010
Toulouse, 31068
France

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