Collateral and growth cycles with heterogeneous agents

Stefano Bosi, Mohanad Ismael and Alain Venditti

Journal of Macroeconomics, 2016, vol. 48, issue C, 327-350

Abstract: We investigate the effects of collateral and monetary policy on economic growth within a Ramsey equilibrium model where agents have different discount factors. Introducing liquidity constraints in segmented markets where (poor) impatient agents without collateral have limited access to credit, we study their implications in terms of welfare and business cycles (based on deterministic cycles through bifurcations and self-fulfilling prophecies). We find that an accommodative monetary policy may be growth-enhancing and welfare-improving (through the inequality reduction) while making unpleasant fluctuations more likely. Conversely, a regulation reinforcing the role of collateral and tempering the financial market imperfections may stimulate the economic growth while pursuing the goal of stabilization.

Keywords: Collateral; Heterogeneous agents; Balanced growth; Endogenous fluctuations; Sunspots; Stabilization policies (search for similar items in EconPapers)
JEL-codes: E21 E32 E52 O42 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0164070416300155
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Collateral and growth cycles with heterogeneous agents (2016)
Working Paper: Collaterals and Growth Cycles with Heterogeneous Agents (2014)
Working Paper: Collaterals and Growth Cycles with Heterogeneous Agents (2014)
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:eee:jmacro:v:48:y:2016:i:c:p:327-350

DOI: 10.1016/j.jmacro.2016.04.007

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().