Asset-price Channels and Macroeconomic Fluctuations
نویسندگان
چکیده
We study a dynamic stochastic general equilibrium model that features heterogeneous agents, incomplete risk sharing, and collateralized debts. Facing uninsurable income risks, households have a precautionary motive for saving and, at the aggregate level, they appear more patient than the entrepreneurs. The relative patience of the households depresses the average loan rate so that the entrepreneurs choose to borrow up to the limit subject to the collateral constraint. The binding collateral constraint allows for interactions between asset prices and debts, which generate an empirically important financial multiplier effect that amplifies and propagates business cycle shocks.
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