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Collateral constraints and rental markets

  • Hippolyte D'Albis

    (INED - Paris School of Economics - Université Paris I - Panthéon-Sorbonne)

  • Eleni Iliopulos

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

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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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00964867.

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Date of creation: 01 Dec 2013
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Publication status: Published, Economics Letters, 2013, 121, 436-439
Handle: RePEc:hal:cesptp:hal-00964867
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00964867
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  1. Matteo Iacoviello & Marina Pavan, 2009. "Housing and debt over the life cycle and over the business cycle," Working Papers 09-12, Federal Reserve Bank of Boston.
  2. 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.
  3. 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.
  4. 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.
  5. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
  6. Becker, Robert A. & Foias, Ciprian, 1987. "A characterization of Ramsey equilibrium," Journal of Economic Theory, Elsevier, vol. 41(1), pages 173-184, February.
  7. Eric R. Young, 2004. "The Wealth Distribution and the Demand for Status," Macroeconomics 0410008, EconWPA.
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