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On the amplification role of collateral constraints

  • Mendicino, Caterina

This letter explores the role of costly liquidation of the collateralized asset in a stochastic version of the Kiyotaki and Moore (1997) model. We document that the degree of inefficiency in the debt enforcement procedure plays a key role in the endogenous amplification of productivity shocks generated by collateral constraints.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 2 ()
Pages: 429-435

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:2:p:429-435
DOI: 10.1016/j.econlet.2012.06.007
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