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Collateral Constraints in the Kiyotaki-Moore Model: Evidence from the Regional Land Price

Author

Listed:
  • Takuma Kunieda

    (School of Economics, Kwansei Gakuin University)

  • Kei Kuwahara

    (Kunieda Laboratory in School of Economics, Kwansei Gakuin University)

Abstract

This paper empirically examines collateral constraints in the Kiyotaki and Moore [1997. Credit cycles. Journal of Political Economy 105(2), 211-248] model using land price data from three major prefectures in Japan: Tokyo, Osaka, and Hyogo. After confirming the stationarity of land prices, we estimate their dynamic equations and show that they follow a second-order autoregressive (AR(2)) process, consistent with the presence of binding collateral constraints. We further apply the supremum Wald test and identify structural breaks at the onset of the early 1990s asset price bubble collapse. These results suggest that financial frictions played a critical role in shaping land price dynamics in Japan's regional economies. Overall, our findings demonstrate that the Kiyotaki-Moore framework provides a useful tool for capturing the dynamic behavior of financially constrained economies. By providing new regional evidence, this study contributes to the literature on macroeconomics and financial market imperfections.

Suggested Citation

  • Takuma Kunieda & Kei Kuwahara, 2025. "Collateral Constraints in the Kiyotaki-Moore Model: Evidence from the Regional Land Price," Discussion Paper Series 300, School of Economics, Kwansei Gakuin University.
    • Handle: RePEc:kgu:wpaper:300
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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