Endogenous Cycles in Collateralized Credit

Vyacheslav Arbuzov, Yu Awaya, Hiroki Fukai and Makoto Watanabe

Journal of Money, Credit and Banking, 2024, vol. 56, issue 2-3, 627-646

Abstract: This paper presents a simple and tractable equilibrium model, where collateralized credit emerges under limited commitment. We show that even if there is no time variation in fundamentals, credit trade can fluctuate endogenously over time. In our theory, credit fragilities are associated with endogenous fluctuations in trade probabilities, collateral values, and lending volumes.

Date: 2024
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https://doi.org/10.1111/jmcb.13029

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:56:y:2024:i:2-3:p:627-646

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