Macroeconomic Effects of Collateral Requirements and Financial Shocks

Aicha Kharazi

No BEMPS93, BEMPS - Bozen Economics & Management Paper Series from Faculty of Economics and Management at the Free University of Bozen

Abstract: This article explores the implications of borrower's side collateral constraints have on the real economy. The novel element in this model relative to the industry standard model is that I model the entrepreneurs, which are crucial for investment, as collateral constrained. The model is estimated using Bayesian methods and can be employed to measure the role of collateral. Regarding the results, I document that collateral requirements are highly volatile during the period of 2007–2012, and I find that the effect of an increase in collateral requirements is highly significant. Interestingly, the model assigns an important role for collateral in the shock decomposition, and the contribution of financial shocks is much marked during the financial crisis and substantially shapes macroeconomic fluctuations.

Keywords: Business Loan; Collateral; Financial Shocks. (search for similar items in EconPapers)
JEL-codes: E32 E44 G21 (search for similar items in EconPapers)
Pages: [79 pages]
Date: 2022-04
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-ent, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://repec.unibz.it/bemps93.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bzn:wpaper:bemps93

Access Statistics for this paper

More papers in BEMPS - Bozen Economics & Management Paper Series from Faculty of Economics and Management at the Free University of Bozen Contact information at EDIRC.
Bibliographic data for series maintained by F. Marta L. Di Lascio (marta.dilascio@unibz.it) and Alessandro Fedele (alessandro.fedele@unibz.it).