Bank Lending and Relationship Capital

I develop an equilibrium theory of bank lending relationships in an economy subject to search frictions and limited enforceability. The model features a dynamic contracting problem embedded within a directed search equilibrium with aggregate and bank-specific uncertainty. The interaction between search and agency frictions generates a slow accumulation of lending relationship capital and distorts the optimal allocation of credit along both intensive and extensive margins. A crisis characterized by a sizable destruction of lending relationships therefore leads to a significant contraction in credit and a slow recovery, consistent with the Great Recession. I calibrate the model to study aggregate and cross-sectional implications and analyze policies aimed at reviving bank lending.

Author dc:creator

• Boualam, Mohammed Yasser

Advisor dc:contributor.advisor

• Itay Goldstein

Statement dc:rights

• Mohammed Yasser Boualam

Language dc:language

en

Repository record dc:identifier.uri

https://repository.upenn.edu/handle/20.500.14332/28448

OAI identifier oai:identifier

oai:repository.upenn.edu:20.500.14332/28448