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Credit Market Frictions And The Amplification-Persistence Trade-Off

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  • Patrick-Antoine Pintus

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

The issue of how endogenous borrowing constraints lead to the amplification and persistence of aggregate shocks is revisited in this paper. Specifically, I show that an amplification-persistence trade-off is embodied in the setting proposed by Kiyotaki and Moore (1997). The key point is that while complex unit roots associated with persistence of temporary shocks require the fraction of credit-constrained firms to be small enough, large amplification relies on the opposite condition. Incidentally, I confirm the occurrence of periodic and quasi-periodic cycles around the determinate steady state.

Suggested Citation

  • Patrick-Antoine Pintus, 2009. "Credit Market Frictions And The Amplification-Persistence Trade-Off," Working Papers halshs-00353602, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00353602
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00353602
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