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Credit limits and heterogeneity in general equilibrium models with a finite number of agents

Pham, Ngoc-Sang (2018): Credit limits and heterogeneity in general equilibrium models with a finite number of agents.

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Abstract

We introduce two-period general equilibrium models with heterogeneous producers and financial frictions. Any agent can borrow to realize their productive project but the debt repayment does not exceed a fraction (so-called credit limit) of the project's value. Our framework allows us to investigate the aggregate and distributional effects of credit limits and heterogeneity of agents. The connection between credit limits, welfare, and efficiency is also explored.

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