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Collateral constraints and the amplification-persistence trade-off

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  • Patrick-Antoine Pintus

    ()
    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

Abstract

Kiyotaki and Moore (1997) have stressed that an amplification-persistence trade-off arises when collateral constraints on borrowing interact with lumpy investment. In this paper, I confirm by way of example that collateral constraints are not by themselves responsible for such a deceptive trade-off. More precisely, I show in a standard general-equilibrium two-agent model that the amplification and persistence of the impact of temporary shocks go hand in hand. Unlike Kiyotaki-Moore's, the economy features concave utility and production functions, an endogenous interest rate and neo-classical input accumulation

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00439243.

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Date of creation: 2009
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Handle: RePEc:hal:wpaper:halshs-00439243

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Related research

Keywords: collateral constraints; amplification and persistence of aggregate shocks;

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  1. 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.
  2. John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
  3. Pintus, Patrick A., 2011. "Collateral constraints and the amplification-persistence trade-off," Economics Letters, Elsevier, vol. 110(1), pages 64-66, January.
  4. Pierre-André Chiappori & Monica Paiella, 2008. "Relative Risk Aversion Is Constant: Evidence from Panel Data," Discussion Papers 5_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  5. Narayana R. Kocherlakota, 2000. "Creating business cycles through credit constraints," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-10.
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Cited by:
  1. Patrick-Antoine Pintus, 2009. "Collateral constraints and the amplification-persistence trade-off," Working Papers halshs-00439243, HAL.
  2. Caterina Mendicino, 2011. "On the amplification role of collateral constraints," Working Papers w201115, Banco de Portugal, Economics and Research Department.

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