A Behavioral Model of the Credit Boom

  1. David Peón 1
  2. Anxo Calvo 1
  3. Manel Antelo 2
  1. 1 Universidade da Coruña
    info

    Universidade da Coruña

    La Coruña, España

    ROR https://ror.org/01qckj285

  2. 2 Universidade de Santiago de Compostela
    info

    Universidade de Santiago de Compostela

    Santiago de Compostela, España

    ROR https://ror.org/030eybx10

Revista:
Documentos de Traballo. Análise Económica

ISSN: 1138-0713

Ano de publicación: 2014

Número: 57

Páxinas: 1-29

Tipo: Documento de traballo

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Outras publicacións en: Documentos de Traballo. Análise Económica

Resumo

We offer a simple model of herding and limits of arbitrage in retail credit markets that follows the behavioral approach of Shleifer (2000). We show why solely behavioral biases by participants in the industry could explain how a credit bubble might be fed by the banking sector. According to our model, optimistic banks would lead the industry while it would be rational for unbiased banks to herd under conditions we derive. An important finding is the role of limits of arbitrage in the industry: there would be no incentives for rational banks to correct the misallocations of their biased competitors.

Fonte de datos: Dialnet