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Collateralized capital and news-driven cycles

Author

Listed:
  • Keiichiro Kobayashi

    () (Research Institute of Economy, Trade, and Industry)

  • Kengo Nutahara

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

Abstract

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.

Suggested Citation

  • Keiichiro Kobayashi & Kengo Nutahara, 2007. "Collateralized capital and news-driven cycles," Economics Bulletin, AccessEcon, vol. 5(18), pages 1-9.
  • Handle: RePEc:ebl:ecbull:eb-07e30005
    as

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    References listed on IDEAS

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    1. Nir Jaimovich & Sergio Rebelo, 2009. "Can News about the Future Drive the Business Cycle?," American Economic Review, American Economic Association, pages 1097-1118.
    2. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-248, April.
    3. KOBAYASHI Keiichiro & NUTAHARA Kengo, 2007. "Collateralized capital and News-driven cycles," Discussion papers 07062, Research Institute of Economy, Trade and Industry (RIETI).
    4. Beaudry, Paul & Portier, Franck, 2004. "An exploration into Pigou's theory of cycles," Journal of Monetary Economics, Elsevier, pages 1183-1216.
    5. Keiichiro Kobayashi & Kengo Nutahara, 2007. "Collateralized capital and news-driven cycles," Economics Bulletin, AccessEcon, vol. 5(18), pages 1-9.
    6. Marcel Fratzscher & Livio Stracca, 2009. "The political economy under monetary union: has the euro made a difference?," Economic Policy, CEPR;CES;MSH, pages 307-348.
    7. Kobayashi, Keiichiro & Nakajima, Tomoyuki & Inaba, Masaru, 2012. "Collateral Constraint And News-Driven Cycles," Macroeconomic Dynamics, Cambridge University Press, pages 752-776.
    8. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-224, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Paul Beaudry & Franck Portier, 2014. "News-Driven Business Cycles: Insights and Challenges," Journal of Economic Literature, American Economic Association, pages 993-1074.
    2. NUTAHARA Kengo, 2010. "Asset Prices and Monetary Policy in a Sticky-Price Economy with Financial Frictions," Discussion papers 10060, Research Institute of Economy, Trade and Industry (RIETI).
    3. Guo Shen, 2011. "News Shocks and the External Finance Premium," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-27.
    4. KOBAYASHI Keiichiro & NUTAHARA Kengo, 2007. "Collateralized capital and News-driven cycles," Discussion papers 07062, Research Institute of Economy, Trade and Industry (RIETI).
    5. Kobayashi Keiichiro & Nutahara Kengo, 2010. "Nominal Rigidities, News-Driven Business Cycles, and Monetary Policy," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-26.
    6. Kobayashi, Keiichiro, 2011. "The Diamond-Rajan Bank Runs in a Production Economy," PIE/CIS Discussion Paper 515, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    7. Keiichiro Kobayashi & Kengo Nutahara, 2007. "Collateralized capital and news-driven cycles," Economics Bulletin, AccessEcon, vol. 5(18), pages 1-9.
    8. KOBAYASHI Keiichiro, 2009. "Asset-Price Collapse and Market Disruption - A model of financial crises -," Discussion papers 09045, Research Institute of Economy, Trade and Industry (RIETI).
    9. INABA Masaru & KOBAYASHI Keiichiro, 2009. "Quantitative Significance of Collateral Constraints as an Amplification Mechanism," Discussion papers 09035, Research Institute of Economy, Trade and Industry (RIETI).
    10. KOBAYASHI Keiichiro & NUTAHARA Kengo, 2008. "Nominal Rigidities, News-Driven Business Cycles, and Monetary Policy," Discussion papers 08018, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G1 - Financial Economics - - General Financial Markets

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