Collateral constraints and rental markets

d'Albis, Hippolyte and Iliopoulos, Eleni (2013): Collateral constraints and rental markets. Forthcoming in: Economics Letters

Abstract

We study a benchmark model with collateral constraints and heterogeneous discounting. Contrarily to a rich literature on borrowing limits, we allow for rental markets. By incorporating this missing market, we show that impatient agents choose to rent rather than to own the collateral in the neighborhood of the deterministic steady state. Consequently, impatient agents are not indebted and borrowing constraints play no role in local dynamics.

• Item Type: MPRA Paper
• Language: English
• Keywords: heterogeneous discounting, collateral constraints, rental market, credit market.
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

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