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A Note on Learning in a Credit Economy

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  • Pei Kuang

Abstract

This paper studies the interaction of agents' collateral price beliefs, credit constraint and aggregate economic activity over the business cycle. Learning strengthens the role of collateral constraints in aggregate fluctuations. Under Heterogeneous learning rules, numerical simulations illustrate that bankruptcy on the part of borrowers arises sooner as they track the economy faster.

Suggested Citation

  • Pei Kuang, 2013. "A Note on Learning in a Credit Economy," Discussion Papers 14-08, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:14-08
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    References listed on IDEAS

    as
    1. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-248, April.
    2. Pei Kuang, 2013. "Imperfect Knowledge about Asset Prices and Credit Cycles," CDMA Working Paper Series 201303, Centre for Dynamic Macroeconomic Analysis.
    3. Milani, Fabio, 2007. "Expectations, learning and macroeconomic persistence," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2065-2082, October.
    4. Farmer Roger E. A. & Guo Jang-Ting, 1994. "Real Business Cycles and the Animal Spirits Hypothesis," Journal of Economic Theory, Elsevier, vol. 63(1), pages 42-72, June.
    5. Branch, William A. & Evans, George W., 2006. "A simple recursive forecasting model," Economics Letters, Elsevier, vol. 91(2), pages 158-166, May.
    6. Pei Kuang, 2013. "Imperfect Knowledge About Asset Prices and Credit Cycles," Discussion Papers 13-02r, Department of Economics, University of Birmingham.
    7. Honkapohja, Seppo & Mitra, Kaushik, 2005. "Performance of monetary policy with internal central bank forecasting," Journal of Economic Dynamics and Control, Elsevier, vol. 29(4), pages 627-658, April.
    8. Assenza, Tiziana & Berardi, Michele, 2009. "Learning in a credit economy," Journal of Economic Dynamics and Control, Elsevier, vol. 33(5), pages 1159-1169, May.
    9. Pei Kuang, 2013. "Imperfect Knowledge About Asset Prices and Credit Cycles," Discussion Papers 13-02, Department of Economics, University of Birmingham.
    10. Adam, Klaus & Evans, George W. & Honkapohja, Seppo, 2006. "Are hyperinflation paths learnable?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2725-2748, December.
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    Cited by:

    1. Pei Kuang, 2013. "Imperfect Knowledge About Asset Prices and Credit Cycles," Discussion Papers 13-02, Department of Economics, University of Birmingham.
    2. Pei Kuang, 2013. "Imperfect Knowledge about Asset Prices and Credit Cycles," CDMA Working Paper Series 201303, Centre for Dynamic Macroeconomic Analysis.

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    More about this item

    Keywords

    Learning; Collateral Constraint; Bankruptcy; Heterogeneity;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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