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Credit Cycles Redux

  • Juan Cordoba

    (Rice University)

  • Marla Ripoll

    (University of Pittsburgh)

Theoretical studies have shown that under unorthodox assumptions on preferences and production technologies, collateral constraints can act as a powerful amplification and propagation mechanism of exogenous shocks. We investigate whether or not this result hold under more standard assumptions. We find that collateral constraints generate a typically small output amplification. Large amplification is a "knife- edge" type of result.

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File URL: http://econwpa.repec.org/eps/mac/papers/0210/0210004.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0210004.

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Length: 35 pages
Date of creation: 16 Oct 2002
Date of revision:
Handle: RePEc:wpa:wuwpma:0210004
Note: Type of Document - pdf; pages: 35 ; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Thomas Cooley & Ramon Marimon & Vincenzo Quadrini, 2004. "Aggregate Consequences of Limited Contract Enforceability," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 817-847, August.
  2. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2001. "International and domestic collateral constraints in a model of emerging market crises," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 513-548, December.
  3. Paasche, Bernhard, 2001. "Credit constraints and international financial crises," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 623-650, December.
  4. Fatih Guvenen, 2005. "Reconciling Conflicting Evidence on the Elasticity of Intertemporal Substitution: A Macroeconomic Perspective," Macroeconomics 0507005, EconWPA.
  5. Charles T. Carlstrom & Timothy S. Fuerst, 2000. "Monetary shocks, agency costs, and business cycles," Working Paper 0011, Federal Reserve Bank of Cleveland.
  6. Charles T. Carlstrom & Timothy S. Fuerst, 1996. "Agency costs, net worth, and business fluctuations: a computable general equilibrium analysis," Working Paper 9602, Federal Reserve Bank of Cleveland.
  7. Narayana R. Kocherlakota, 2000. "Creating business cycles through credit constraints," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-10.
  8. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
  9. Timothy S. Fuerst & Charles T. Carlstrom, 1998. "Agency costs and business cycles," Economic Theory, Springer, vol. 12(3), pages 583-597.
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