Itay GoldsteinBoualam, Mohammed Yasser2023-05-222016-07-272016-11-292016-01-012016-11-29https://repository.upenn.edu/handle/20.500.14332/28448I 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.108 p.application/pdfMohammed Yasser BoualamCredit MarketsDynamic ContractingFinancial FrictionsLimited CommitmentRelationship BankingSearch TheoryEconomicsFinance and Financial ManagementDissertation/Thesis