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Collateral constraints and the amplification-persistence trade-off

  • Patrick-Antoine Pintus

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

Kiyotaki and Moore (1997) have stressed that an amplification-persistence trade-off arises when collateral constraints on borrowing interact with lumpy investment. In this paper, I confirm by way of example that collateral constraints are not by themselves responsible for such a deceptive trade-off. More precisely, I show in a standard general-equilibrium two-agent model that the amplification and persistence of the impact of temporary shocks go hand in hand. Unlike Kiyotaki-Moore's, the economy features concave utility and production functions, an endogenous interest rate and neo-classical input accumulation

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Paper provided by HAL in its series Working Papers with number halshs-00439243.

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Date of creation: 2009
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Handle: RePEc:hal:wpaper:halshs-00439243
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00439243/en/
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  1. Cordoba, Juan & Ripoll, Marla, 2002. "Credit Cycles Redux," Working Papers 2002-07, Rice University, Department of Economics.
    • Juan-Carlos Cordoba & Marla Ripoll, 2004. "Credit Cycles Redux," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1011-1046, November.
  2. Patrick-Antoine Pintus, 2009. "Collateral constraints and the amplification-persistence trade-off," Working Papers halshs-00439243, HAL.
  3. Pierre‐André Chiappori & Monica Paiella, 2011. "Relative Risk Aversion Is Constant: Evidence From Panel Data," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1021-1052, December.
  4. John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
  5. Narayana R. Kocherlakota, 2000. "Creating business cycles through credit constraints," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-10.
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