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Collateral and growth cycles with heterogeneous agents

Listed author(s):
  • Stefano Bosi

    ()

    (THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique)

  • Mohanad Ismaël

    ()

    (University of Birzeit - University of Birzeit)

  • Alain Venditti

    (Edhec Business School - Edhec - Edhec, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille 2 - Université Paul Cézanne - Aix-Marseille 3 - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

We investigate the effects of collateral and monetary policy on economic growth within a Ramsey equilibrium model where agents have different discount factors. Introducing liquidity constraints in segmented markets where (poor) impatient agents without collateral have limited access to credit, we study their implications in terms of welfare and business cycles (based on deterministic cycles through bifurcations and self-fulfilling prophecies). We find that an accommodative monetary policy may be growth-enhancing and welfare-improving (through the inequality reduction) while making unpleasant fluctuations more likely. Conversely, a regulation reinforcing the role of collateral and tempering the financial market imperfections may stimulate the economic growth while pursuing the goal of stabilization.

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Paper provided by HAL in its series Post-Print with number hal-01440293.

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Date of creation: Jun 2016
Publication status: Published in Journal of Macroeconomics, 2016, 48 (C), pp.327--350
Handle: RePEc:hal:journl:hal-01440293
Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-01440293
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