A model of borrower reputation as intangible collateral
AbstractIn this paper, we build a Kiyotaki-Moore style collateral amplification framework which generates large endogenous fluctuations in the leverage available to investing firms. We assume that defaulting borrowers lose not only their tangible collateral but also their future debt market access. The possibility of such market exclusion can lead to the emergence of intangible collateral in equilibrium alongside the tangible collateral which is usually studied in the literature. Fluctuations in the value of intangible collateral are isomorphic to fluctuations in the downpayments they need to make in their purchases of productive assets. This modification of the Kiyotaki-Moore model substantially increases its amplification of exogenous shocks. JEL Classification: E44
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Date of creation: Nov 2012
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Other versions of this item:
- Nikolov, Kalin, 2011. "A model of borrower reputation as intangible collateral," MPRA Paper 32939, University Library of Munich, Germany.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- A model of borrower reputation as intangible collateral
by Christian Zimmermann in NEP-DGE blog on 2013-01-15 02:39:13
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- Aoki, Kosuke & Nikolov, Kalin, 2012. "Bubbles, banks and financial stability," Working Paper Series 1495, European Central Bank.
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