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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 - 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

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://shs.hal.science/halshs-00439243
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    Cited by:

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

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