Type of Publication: | Working Paper/Technical Report |
URI (citable link): | http://nbn-resolving.de/urn:nbn:de:bsz:352-214387 |
Author: | Azariadis, Costas; Kaas, Leo |
Year of publication: | 2012 |
Series: | Working Paper Series / Department of Economics ; 2012-16 |
Summary: |
This paper argues that self-fulfilling beliefs in credit conditions can generate endogenously persistent business cycle dynamics. We develop a tractable dynamic general equilibrium model with idiosyncratic firm productivity shocks. Capital from less productive firms is lent to more productive ones in the form of credit secured by collateral and also as unsecured credit based on reputation. A dynamic complementarity between current and future credit constraints permits uncorrelated sunspot shocks to trigger persistent aggregate fluctuations in debt, factor productivity and output. In a calibrated version we compare the features of sunspot cycles with those generated by shocks to economic fundamentals.
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Subject (DDC): | 330 Economics |
Keywords: | Limited enforcement, Credit cycles, Sunspots |
Comment on publication: | http://ideas.repec.org/p/knz/dpteco/1216.html |
Link to License: | In Copyright |
Bibliography of Konstanz: | Yes |
AZARIADIS, Costas, Leo KAAS, 2012. Self-Fulfilling Credit Cycles
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