Credit Cycles in a OLG Economy with Money and Bequest
AbstractIn this paper we develop an overlapping generation version of Kiyotaki and Moore's (hereafter KM) model of the "Credit Cycle". In each period the population consists of two classes of agents: a group of financially constrained agents ("farmers") and one of unconstrained agents ("gatherers"). Each class in turn consists of young and old agents.Each class of agents uses different technologies to produce the same perishable good ("fruit") by means of labour and "land". Land is a durable asset which plays the role not only of an input for production processes but also of collateralizable wealth to secure lenders from the risk of borrowers' default. In a context of intergenerational altruism, old agents leave a bequest to their offspring. Money enters the picture as a means of payment and a reserve of value because it enables to access consumption in old age. In the original paper in which people are infinitely lived (an money as such is absent), KM study the fluctuations following a technological shock. In the OLG version of the model, self susteained oscillations arise naturally. We study the complex dynamics of the allocation of land to farmers and gatherers -which determines aggregate output- and of the price of the durable asset. The next step is the analysis of the conditions under which money is or is not superneutral.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 369.
Date of creation: 04 Jul 2006
Date of revision:
Overlapping Generations; Financial Constraints; Credit Cycles;
Other versions of this item:
- Agliari, A. & Assenza, T. & Delli Gatti, D. & Santoro, E., 2007. ""Credit Cycle" in an OLG Economy with Money and Bequest," CeNDEF Working Papers 07-04, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Agliari Anna & Assenza Tiziana & Delli Gatti Domenico & Santoro Emiliano, 2007. "Credit Cycles in a OLG Economy with Money and Bequest," Money Macro and Finance (MMF) Research Group Conference 2006 103, Money Macro and Finance Research Group.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
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