model of collateralized lending in which: (1) borrowers endogenously determine collateral quality, and (2) lenders can … produce costly information about collateral. In equilibrium, lenders do not produce information and borrowers in wealthier … economies optimally use lower quality collateral. Crises are triggered by unexpected shocks to collateral quality. Wealthier …

which crises happen when credit booms change to an information regime with careful examination of collateral. As this … examination is more valuable when collateral backs projects with low productivity, crises are more likely during booms that …