Do credit constraints amplify macroeconomic fluctuations?
Zheng Liu (),
Pengfei Wang () and
Tao Zha ()
No 2010-01, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta
Previous studies on financial frictions have been unable to establish the empirical significance of credit constraints in macroeconomic fluctuations. This paper argues that the muted impact of credit constraints stems from the absence of a mechanism to explain the observed persistent comovements between housing prices and business investment. We develop such a mechanism by incorporating two key features into a dynamic stochastic general equilibrium model: We identify shocks that shift the demand for collateral assets and allow productive agents to be credit-constrained. A combination of these two features enables our model to successfully generate an empirically important mechanism that amplifies and propagates macroeconomic fluctuations through credit constraints.
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed
Downloads: (external link)
Working Paper: Do credit constraints amplify macroeconomic fluctuations? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:2010-01
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by ().