Work

Endogenous Cycles in Collateralized Credit

Year: 2023

Type: article

Abstract: This paper presents a simple and tractable equilibrium model, where collateralized credit emerges under limited commitment. We show that even if there is no time variation in fundamentals, credit trade can fluctuate endogenously over time. In our theory, credit fragilities are associated with endogenous fluctuations in trade probabilities, collateral values, and lending volumes.

Source: Journal of money credit and banking

DOI: 10.1111/jmcb.13029

Authors: VYACHESLAV ARBUZOV, YU AWAYA, HIROKI FUKAI, MAKOTO WATANABE

Institutions: Corvinus University of Budapest, University of Rochester

Language: English

Topic: Economic theories and models

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: bronze

Funders: National Science Foundation, Japan Center for Economic Research, Japan Society for the Promotion of Science

Awards: Investigations of occurrence of financial crises and suggestions for their prevention, Digitalization and Macro Prudence Policy, Collaborative Research: Communication, Cartels and Collusion