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Collateral constraints and rental markets

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  • d'Albis, Hippolyte
  • Iliopoulos, 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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File URL: http://mpra.ub.uni-muenchen.de/49529/
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File URL: http://mpra.ub.uni-muenchen.de/49586/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49529.

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Date of creation: 03 Sep 2013
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Handle: RePEc:pra:mprapa:49529

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Keywords: heterogeneous discounting; collateral constraints; rental market; credit market.;

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  1. Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
  2. Eric R. Young, 2004. "The Wealth Distribution and the Demand for Status," Macroeconomics 0410008, EconWPA.
  3. Matteo Iacoviello, 2011. "Housing wealth and consumption," International Finance Discussion Papers 1027, Board of Governors of the Federal Reserve System (U.S.).
  4. Zou, Heng-fu, 1994. "'The spirit of capitalism' and long-run growth," European Journal of Political Economy, Elsevier, vol. 10(2), pages 279-293, July.
  5. Becker, Robert A. & Foias, Ciprian, 1987. "A characterization of Ramsey equilibrium," Journal of Economic Theory, Elsevier, vol. 41(1), pages 173-184, February.
  6. 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.
  7. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
  8. Matteo Iacoviello & Marina Pavan, 2009. "Housing and Debt Over the Life Cycle and Over the Business Cycle," Boston College Working Papers in Economics 723, Boston College Department of Economics, revised 19 Sep 2011.
  9. Calza, Alessandro & Stracca, Livio & Monacelli, Tommaso, 2009. "Housing finance and monetary policy," Working Paper Series 1069, European Central Bank.
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