Collateral constraints and the amplification-persistence trade-off
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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- Cordoba, Juan & Ripoll, Marla, 2002.
"Credit Cycles Redux,"
2002-07, Rice University, Department of Economics.
- Patrick-Antoine Pintus, 2009.
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1995-5, Edinburgh School of Economics, University of Edinburgh.
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