Mendicino, Caterina (2008): On the amplification role of collateral constraints.
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Following the seminal contribution of Kiyotaki and Moore (1997), the role of collateral constraints for business cycle fluctuations has been highlighted by several authors and collateralized debt is becoming a popular feature of business cycle models. In contrast, Kocherlakota (2000) and Cordoba and Ripoll (2004) demonstrate that collateral constraints per se are unable to propagate and amplify exogenous shocks, unless unorthodox assumptions on preferences and production technologies are made. The aim of this paper is to examine the contribution of costly debt enforcement procedures in the amplification of business cycle fluctuations through collateral constraints. We show that for realistic degrees of inefficiency, collateral constraints can significantly amplify the effects of productivity shocks on output even under standard assumptions on preferences and technology.
|Item Type:||MPRA Paper|
|Original Title:||On the amplification role of collateral constraints|
|Keywords:||business cycle, debt enforcement procedures, credit frictions|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth
|Depositing User:||caterina mendicino|
|Date Deposited:||05. Jul 2008 05:16|
|Last Modified:||13. Feb 2013 07:54|
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