Information Technology and Credit Markets

25 Pages Posted: 11 Jul 2001

See all articles by Robert B. H. Hauswald

Robert B. H. Hauswald

American University - Department of Finance and Real Estate

Robert Marquez

University of California, Davis

Date Written: February 2001

Abstract

This paper analyzes the impact of an information technology revolution on credit markets. We focus on two aspects of technological progress. On the one hand, better information technology may result in improved information processing; on the other, it might also lead to low cost or even free access to information through, for example, informational spillovers. In the context of credit screening, we show that an improved ability to process information increases interest rates and bank profits. However, better access to information decreases interest rates and the returns from screening. Hence, predictions regarding the pricing of financial claims hinge on the overall effect ascribed to the technological progress. Furthermore, we show that our results generalize to other financial markets where informational asymmetries are prime determinants of profitability, such as insurance and securities markets.

Suggested Citation

Hauswald, Robert B.H. and Marquez, Robert S., Information Technology and Credit Markets (February 2001). Available at SSRN: https://ssrn.com/abstract=276562 or http://dx.doi.org/10.2139/ssrn.276562

Robert B.H. Hauswald (Contact Author)

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-1996 (Phone)
202-885-1946 (Fax)

Robert S. Marquez

University of California, Davis ( email )

One Shields Avenue
Apt 153
Davis, CA 95616
United States

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