Suarez, Javier and Sussman, Oren (2004) Endogenous Cycles in a Stiglitz-Weiss Economy. In: Bhattacharya, Sudipto, Boot, Arnoud and Thakor, Anjan V., (eds.) Credit, Intermediation, and the Macroeconomy: Readings and Perspectives in Modern Financial Theory. Oxford University Press, pp. 833-855. ISBN 978-0199243068Full text not available from this repository.
The literature on financial imperfections and business cycles has focused onpropagation mechanisms. In this paper we model a purereversion mechanism, such that the economy may converge to a two-period equilibrium cycle. This mechanism confirms that financial imperfections may have a dramatic amplification effect. Unlike in some related models, contracts are complete. Indexation is not assumed away. The welfare properties of a possible stabilizing policy are analyzed. The model itself is a dynamic extension of the well-known Stiglitz-Weiss model of lending under moral hazard. Although stylized the model still captures some important features of credit cycles.
|Item Type:||Book Section|
|Keywords:||Credit Rationing; Endogenous Cycles; Business Cycles|
|Date Deposited:||22 Mar 2013 16:18|
|Last Modified:||31 Oct 2016 12:05|
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