Borrowing constraints and asset market dynamics: evidence from the Pacific Basin

Kenneth Kasa

Economic Review, 1998, 17-28

Abstract: This paper estimates a linearized, stochastic version of Kiyotaki and Moore's (1997) credit cycle model, using land price data from Hong Kong, Japan, and Korea. It is shown that the welfare costs of borrowing constraints are positively related to the persistence of (detrended) land price fluctuations. When the residual demand curve for land is inelastic and the steady state share of land held by the constrained sector is less than 30 percent, welfare costs are less than 1 percent GDP in all countries. However, the strained sector becomes more important and as the elasticity of unconstrained land demand increases. For example, if the efficient share of the constrained sector is 50 percent and the residual demand elasticity is 2.0, then costs range from 9 percent of GDP in Korea, where fluctuations are relatively transitory, to 11 percent of GDP in Japan, where land price fluctuations are the most persistent.

Keywords: Asia; Pacific Area; Financial crises - Asia (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://www.frbsf.org/wp-content/uploads/17-28.pdf Full Text (text/html)
https://fraser.stlouisfed.org/title/economic-revie ... rket-dynamics-643625
https://fraser.stlouisfed.org/files/docs/historica ... cBasin_wp1998-04.pdf (application/pdf)

Related works:
Working Paper: Borrowing constraints and asset market dynamics: evidence from the Pacific Basin (1998)
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:fip:fedfer:y:1998:p:17-28:n:3

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Economic Review from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().