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"Credit Cycle" in an OLG Economy with Money and Bequest

Anna Agliari (), Tiziana Assenza, Domenico Delli Gatti () and Emiliano Santoro ()

No 07-04, CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance

Abstract: In the late '90s Kiyotaki and Moore (KM) put forward a new framework (Kiyotaki and Moore,1997) to explore the Financial Accelerator hypothesis. The original model was framed in an Infinitely Lived Agent context (ILA-KM economy). As in KM we develop a dynamic model in which the durable asset ("land") is not only an input but also collateralizable wealth to secure lenders from the risk of borrowers' default. In this paper, however, we model an OLG-KM economy whose novel feature is the role of money as a store of value and of bequest as a vehicle of resources to be "invested" in landholding. The dynamics generated by the model are complex. Not only cyclical patterns are routinely generated but the periodicity and amplitude are irregular. A route to chaotic dynamics is open.

Date: 2007
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Working Paper: Credit Cycles in a OLG Economy with Money and Bequest (2007) Downloads
Working Paper: Credit Cycles in a OLG Economy with Money and Bequest (2006)
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