Financial Constraints, Endogenous Markups, and Self-fulfilling Equilibria
AbstractWe show that self-fulfilling equilibria and indeterminacy can easily arise in a simple financial accelerator model with reasonable parameter calibrations and without increasing returns in production. A key feature for generating indeterminacy in our model is the countercyclical markup due to the procyclical loan to output ratio. We illustrate, via simulations, that our financial accelerator model can generate rich business cycle dynamics, including hump-shaped output in response to demand shocks as well as serial autocorrelation in output growth rates.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18074.
Date of creation: May 2012
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Other versions of this item:
- Benhabib, Jess & Wang, Pengfei, 2013. "Financial constraints, endogenous markups, and self-fulfilling equilibria," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 789-805.
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-DGE-2012-05-22 (Dynamic General Equilibrium)
- NEP-FDG-2012-05-22 (Financial Development & Growth)
- NEP-MAC-2012-05-22 (Macroeconomics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Financial Constraints, Endogenous Markups, and Self-fulfilling Equilibria
by Christian Zimmermann in NEP-DGE blog on 2012-05-25 20:35:50
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