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Collateral constraints and rental markets

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  • d’Albis, Hippolyte
  • Iliopulos, Eleni

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.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 121 (2013)
Issue (Month): 3 ()
Pages: 436-439

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Handle: RePEc:eee:ecolet:v:121:y:2013:i:3:p:436-439

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Heterogeneous discounting; Collateral constraints; Rental market; Credit market;

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  1. Matteo Iacoviello, 2011. "Housing wealth and consumption," International Finance Discussion Papers 1027, Board of Governors of the Federal Reserve System (U.S.).
  2. Iacoviello, Matteo & Pavan, Marina, 2013. "Housing and debt over the life cycle and over the business cycle," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 221-238.
  3. Alessandro Calza & Tommaso Monacelli & Livio Stracca, 2013. "Housing Finance And Monetary Policy," Journal of the European Economic Association, European Economic Association, vol. 11, pages 101-122, 01.
  4. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
  5. Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
  6. Becker, Robert A. & Foias, Ciprian, 1987. "A characterization of Ramsey equilibrium," Journal of Economic Theory, Elsevier, vol. 41(1), pages 173-184, February.
  7. Luo, Yulei & Young, Eric R., 2009. "The Wealth Distribution And The Demand For Status," Macroeconomic Dynamics, Cambridge University Press, vol. 13(S1), pages 1-30, May.
  8. Heng-fu Zou, 1995. "'The spirit of capitalism' and long-run growth," CEMA Working Papers 94, China Economics and Management Academy, Central University of Finance and Economics.
  9. Becker, Robert A, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 375-82, September.
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