Kinks and Gains from Credit Cycles
Research output: Working paper › Research
Credit-market imperfections are at the centre stage of several theories of business fluctuations. Since a lot of research seeks to address the welfare consequences of stabilization policies, we revisit the fundamental question of quantifying the cost of business cycles in a model where household borrowing is subject to a collateral constraint. Business cycles occasionally change the credit-market conditions, making households temporarily unconstrained and better off. This effect can dominate the conventional losses from uncertainty, thus making fluctuations welfare-dominate certainty.
Original language | English |
---|---|
Number of pages | 27 |
Publication status | Published - 29 Jul 2019 |
Series | CEPR Discussion Paper Series |
---|---|
Number | DP13795 |
- Faculty of Social Sciences - Collateral constraints, Cost of business cycles, precautionary saving
Research areas
Links
- https://ssrn.com/abstract=3428315
Final published version
ID: 222257122