Bankruptcy Resolution and Credit Cycles
You may be able to download this chapter for free via the Document Object Identifier.
We study how the macroeconomic dynamics following credit cycles vary with business bankruptcy institutions. Using data on bankruptcy efficiency and business credit around the world, we document that business credit booms are followed by severe declines in output, investment, and consumption in environments with poorly functioning business bankruptcy. On the contrary, in settings with well-functioning business bankruptcy, the aftermath of credit booms is characterized by moderate changes in economic activities. We use a simple model to lay out how and when efficient bankruptcy systems can mitigate the negative consequences of credit booms.
Supplementary Information
Published From Paper
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
