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Collateralized capital and news-driven cycles

  • Keiichiro Kobayashi

    ()

    (Research Institute of Economy, Trade, and Industry)

  • Kengo Nutahara

    ()

    (Graduate School of Economics, University of Tokyo, and the JSPS Research Fellow)

Kobayashi, Nakajima, and Inaba (2007) show that in the neoclassical business cycle models with collateral constraints, a boom can be generated in response to an optimistic change in expectations on the future state of the economy. They call this business cycle a news-driven cycle. In their models, land is used as collateral, and borrowing for working capital is limited by the value of collateralized land. We simplify their model to the one without land. We show that in the economy where capital goods are used as collateral, the news-driven cycles can be generated.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 5 (2007)
Issue (Month): 18 ()
Pages: 1-9

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Handle: RePEc:ebl:ecbull:eb-07e30005
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  1. KOBAYASHI Keiichiro & NAKAJIMA Tomoyuki & INABA Masaru, 2007. "Collateral Constraint and News-driven Cycles," Discussion papers 07013, Research Institute of Economy, Trade and Industry (RIETI).
  2. Christiano, Lawrence & Ilut, Cosmin & Motto, Roberto & Rostagno, Massimo, 2008. "Monetary policy and stock market boom-bust cycles," Working Paper Series 0955, European Central Bank.
  3. Nir Jaimovich & Sergio Rebelo, 2006. "Can News About the Future Drive the Business Cycle?," NBER Working Papers 12537, National Bureau of Economic Research, Inc.
  4. Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
  6. KOBAYASHI Keiichiro & NUTAHARA Kengo, 2007. "Collateralized capital and News-driven cycles," Discussion papers 07062, Research Institute of Economy, Trade and Industry (RIETI).
  7. Beaudry, Paul & Portier, Franck, 2004. "An exploration into Pigou's theory of cycles," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1183-1216, September.
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