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Collateral constraints and rental markets

  • d’Albis, Hippolyte
  • Iliopulos, Eleni

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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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 121 (2013)
Issue (Month): 3 ()
Pages: 436-439

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Handle: RePEc:eee:ecolet:v:121:y:2013:i:3:p:436-439
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Heng-fu Zou, 1995. "'The spirit of capitalism' and long-run growth," CEMA Working Papers 94, China Economics and Management Academy, Central University of Finance and Economics.
  2. John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
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  4. Eric R. Young, 2004. "The Wealth Distribution and the Demand for Status," Macroeconomics 0410008, EconWPA.
  5. 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.
  6. 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.
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  8. Matteo Iacoviello, 2011. "Housing wealth and consumption," International Finance Discussion Papers 1027, Board of Governors of the Federal Reserve System (U.S.).
  9. Becker, Robert A. & Foias, Ciprian, 1987. "A characterization of Ramsey equilibrium," Journal of Economic Theory, Elsevier, vol. 41(1), pages 173-184, February.
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