Collateral constraints and the amplification-persistence trade-off

Patrick-Antoine Pintus (1)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

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

Mots clés: collateral constraints; amplification and persistence of aggregate shocks

Domaines: Economies et finances

Patrick-Antoine Pintus. Collateral constraints and the amplification-persistence trade-off. 2009. ⟨halshs-00439243⟩