IDEAS home Printed from https://ideas.repec.org/p/zbw/esrepo/144572.html
   My bibliography  Save this paper

Credit Constraints and Aggregate Economic Activity Over the Business Cycles

Author

Listed:
  • Giorgadze, Tamar
  • Vasilev, Aleksandar

Abstract

The paper examines that imperfections in financial markets are themselves a source of macroeconomic fluctuations. Small, temporary shocks to technology or income distribution can generate large fluctuations in output and asset prices and spill over to other sectors. The work is based on the original model by Kiyotaki and Moore (1997). This paper will simulate a one-unit technology shock and study the propagation through the credit channel, evaluating its quantitative impact. While in the Kiyotaki-Moore model there is a linear production function used, we will try to do the derivation using the non-linear function and analyze how it changes the previously obtained result.

Suggested Citation

  • Giorgadze, Tamar & Vasilev, Aleksandar, 2016. "Credit Constraints and Aggregate Economic Activity Over the Business Cycles," EconStor Research Reports 144572, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esrepo:144572
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/144572/1/credit_BC.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Juan-Carlos Cordoba & Marla Ripoll, 2004. "Credit Cycles Redux," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1011-1046, November.
    2. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    3. G. B. Gorton & Ping He, 2008. "Bank Credit Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(4), pages 1181-1214.
    4. Hirano, Tomohiro & Inaba, Masaru, 2010. "Asset Price Bubbles in the Kiyotaki-Moore Model," MPRA Paper 36632, University Library of Munich, Germany.
    5. Kenneth Kasa, 1998. "Borrowing constraints and asset market dynamics: evidence from the Pacific Basin," Economic Review, Federal Reserve Bank of San Francisco, pages 17-28.
    6. Nobuhiro Kiyotaki, 1998. "Credit and Business Cycles," The Japanese Economic Review, Japanese Economic Association, vol. 49(1), pages 18-35, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shirai, Daichi, 2016. "Persistence and Amplification of Financial Frictions," MPRA Paper 72187, University Library of Munich, Germany.
    2. Pei Kuang, 2013. "Imperfect Knowledge about Asset Prices and Credit Cycles," CDMA Working Paper Series 201303, Centre for Dynamic Macroeconomic Analysis.
    3. Amable, Bruno & Chatelain, Jean-Bernard & Ralf, Kirsten, 2010. "Patents as collateral," Journal of Economic Dynamics and Control, Elsevier, vol. 34(6), pages 1092-1104, June.
    4. Caterina Mendicino, 2005. "Credit Market Development, Asset Prices and Business Cycle," Money Macro and Finance (MMF) Research Group Conference 2005 74, Money Macro and Finance Research Group.
    5. Anna Agliari & Tiziana Assenza & Domenico Delli Gatti & Emiliano Santoro, 2006. "Credit Cycles in a OLG Economy with Money and Bequest," Computing in Economics and Finance 2006 369, Society for Computational Economics.
    6. Mendicino, Caterina, 2012. "On the amplification role of collateral constraints," Economics Letters, Elsevier, vol. 117(2), pages 429-435.
    7. Assenza, T., 2007. "Borrowing Constraints, Multiple Equilibria and Monetary Policy," CeNDEF Working Papers 07-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    8. Thomas Drechsel, 2023. "Earnings-Based Borrowing Constraints and Macroeconomic Fluctuations," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(2), pages 1-34, April.
    9. Zheng Liu & Pengfei Wang & Tao Zha, 2009. "Do credit constraints amplify macroeconomic fluctuations?," Working Paper Series 2009-28, Federal Reserve Bank of San Francisco.
    10. Hirano, Tomohiro, 2009. "Financial Development and Amplification," MPRA Paper 16907, University Library of Munich, Germany.
    11. Mendicino, Caterina, 2012. "On the amplification role of collateral constraints," Economics Letters, Elsevier, vol. 117(2), pages 429-435.
    12. Vlieghe, Gertjan W, 2007. "Imperfect credit markets: implications for monetary policy," MPRA Paper 12957, University Library of Munich, Germany.
    13. Jarrow, Robert A., 2014. "Financial crises and economic growth," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(2), pages 194-207.
    14. Florin Bilbiie & Xavier Ragot, 2021. "Optimal Monetary Policy and Liquidity with Heterogeneous Households," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 71-95, July.
    15. Ravn, Søren Hove, 2016. "Endogenous credit standards and aggregate fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 89-111.
    16. Bos, Jaap & Li, Runliang & Sanders, Mark, 2018. "Hazardous Lending: The Impact of Natural Disasters on Banks'Asset Portfolio," Research Memorandum 021, Maastricht University, Graduate School of Business and Economics (GSBE).
    17. Donal Smith, 2015. "Collateral Constraints and the Interest Rate," Discussion Papers 15/22, Department of Economics, University of York.
    18. Chakraborty, Suparna, 2006. "Amplifying Business Cycles through Credit Constraints," MPRA Paper 1808, University Library of Munich, Germany.
    19. repec:hal:wpspec:info:hdl:2441/j75mfllkr89c8aod1nr586ksc is not listed on IDEAS
    20. Pintus, Patrick A. & Wen, Yi & Xing, Xiaochuan, 2022. "The inverted leading indicator property and redistribution effect of the interest rate," European Economic Review, Elsevier, vol. 148(C).
    21. Ilhyock Shim & Goetz Von Peter, 2007. "Distress Selling and Asset Market Feedback," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 16(5), pages 243-291, December.

    More about this item

    Keywords

    Credit cycles; aggregate fluctuations;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:esrepo:144572. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zbwkide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.