A model of borrower reputation as intangible collateral

Kalin Nikolov

No 1490, Working Paper Series from European Central Bank

Abstract: In this paper, we build a Kiyotaki-Moore style collateral amplification framework which generates large endogenous fluctuations in the leverage available to investing firms. We assume that defaulting borrowers lose not only their tangible collateral but also their future debt market access. The possibility of such market exclusion can lead to the emergence of intangible collateral in equilibrium alongside the tangible collateral which is usually studied in the literature. Fluctuations in the value of intangible collateral are isomorphic to fluctuations in the downpayments they need to make in their purchases of productive assets. This modification of the Kiyotaki-Moore model substantially increases its amplification of exogenous shocks. JEL Classification: E44

Keywords: aggregate fluctuations; collateral constraints (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-dge
Note: 288883
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: A model of borrower reputation as intangible collateral (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20121490

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