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"Credit Cycle" in an OLG Economy with Money and Bequest

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  • Agliari, A.
  • Assenza, T.

    ()
    (Universiteit van Amsterdam)

  • Delli Gatti, D.
  • Santoro, E.

Abstract

In the late '90s Kiyotaki and Moore (KM) put forward a new framework (Kiyotaki and Moore,1997) to explore the Financial Accelerator hypothesis. The original model was framed in an Infinitely Lived Agent context (ILA-KM economy). As in KM we develop a dynamic model in which the durable asset ("land") is not only an input but also collateralizable wealth to secure lenders from the risk of borrowers' default. In this paper, however, we model an OLG-KM economy whose novel feature is the role of money as a store of value and of bequest as a vehicle of resources to be "invested" in landholding. The dynamics generated by the model are complex. Not only cyclical patterns are routinely generated but the periodicity and amplitude are irregular. A route to chaotic dynamics is open.

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File URL: http://www1.fee.uva.nl/cendef/publications/papers/KMOLGpap6.pdf
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Bibliographic Info

Paper provided by Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance in its series CeNDEF Working Papers with number 07-04.

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Date of creation: 2007
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Handle: RePEc:ams:ndfwpp:07-04

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Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands
Phone: + 31 20 525 52 58
Fax: + 31 20 525 52 83
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Web page: http://www.fee.uva.nl/cendef/
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  1. Ben Bernanke & Mark Gertler, 1987. "Financial Fragility and Economic Performance," NBER Working Papers 2318, National Bureau of Economic Research, Inc.
  2. Bruce C. Greenwald & Joseph E. Stiglitz, 1988. "Financial Market Imperfections and Business Cycles," NBER Working Papers 2494, National Bureau of Economic Research, Inc.
  3. Edison, Hali J & Luangaram, Pongsak & Miller, Marcus, 2000. "Asset Bubbles, Leverage and 'Lifeboats': Elements of the East Asian Crisis," Economic Journal, Royal Economic Society, vol. 110(460), pages 309-34, January.
  4. Cordoba, Juan Carlos & Ripoll, Marla, 2010. "Collateral Constraints in a Monetary Economy," Staff General Research Papers 32123, Iowa State University, Department of Economics.
  5. Nobuhiro Kiyotaki & John Moore, 2012. "Liquidity, Business Cycles, and Monetary Policy," NBER Working Papers 17934, National Bureau of Economic Research, Inc.
  6. Cordoba, Juan & Ripoll, Marla, 2002. "Credit Cycles Redux," Working Papers 2002-07, Rice University, Department of Economics.
    • Juan-Carlos Cordoba & Marla Ripoll, 2004. "Credit Cycles Redux," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1011-1046, November.
  7. Bruce C. Greenwald & Joseph E. Stiglitz, 1990. "Macroeconomic Models with Equity and Credit Rationing," NBER Working Papers 3533, National Bureau of Economic Research, Inc.
  8. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  9. 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.
  10. Matteo Iacoviello & Raoul Minetti, 2006. "Liquidity Cycles," 2006 Meeting Papers 676, Society for Economic Dynamics.
  11. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  12. Nobuhiro Kiyotaki & John Moore, 2004. "Evil is the Root of all Money (Clarendon Lectures 1)," ESE Discussion Papers 110, Edinburgh School of Economics, University of Edinburgh.
  13. Nobuhiro Kiyotaki & John Moore, 2002. "Balance-Sheet Contagion," American Economic Review, American Economic Association, vol. 92(2), pages 46-50, May.
  14. Kenneth Kasa, 1998. "Borrowing constraints and asset market dynamics: evidence from the Pacific Basin," Pacific Basin Working Paper Series 98-04, Federal Reserve Bank of San Francisco.
  15. Weiss, Laurence M, 1980. "The Effects of Money Supply on Economic Welfare in the Steady State," Econometrica, Econometric Society, vol. 48(3), pages 565-76, April.
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