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Collateral constraints and the amplification-persistence trade-off

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  • Patrick-Antoine Pintus

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

Abstract

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

Suggested Citation

  • Patrick-Antoine Pintus, 2009. "Collateral constraints and the amplification-persistence trade-off," Working Papers halshs-00439243, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00439243
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00439243
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    References listed on IDEAS

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    1. Pintus, Patrick A., 2011. "Collateral constraints and the amplification-persistence trade-off," Economics Letters, Elsevier, vol. 110(1), pages 64-66, January.
    2. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-248, April.
    3. 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.
    4. 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.
    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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    Cited by:

    1. Pintus, Patrick A., 2011. "Collateral constraints and the amplification-persistence trade-off," Economics Letters, Elsevier, vol. 110(1), pages 64-66, January.
    2. Mendicino, Caterina, 2012. "On the amplification role of collateral constraints," Economics Letters, Elsevier, vol. 117(2), pages 429-435.
    3. Shirai, Daichi, 2016. "Persistence and Amplification of Financial Frictions," MPRA Paper 72187, University Library of Munich, Germany.

    More about this item

    Keywords

    collateral constraints; amplification and persistence of aggregate shocks;

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