Kinks and Gains from Credit Cycles
Publikation: Working paper › Forskning
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Kinks and Gains from Credit Cycles. / Jensen, Henrik; Ravn, Søren Hove; Santoro, Emiliano.
2019.Publikation: Working paper › Forskning
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TY - UNPB
T1 - Kinks and Gains from Credit Cycles
AU - Jensen, Henrik
AU - Ravn, Søren Hove
AU - Santoro, Emiliano
PY - 2019/7/29
Y1 - 2019/7/29
N2 - 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.
AB - 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.
KW - Faculty of Social Sciences
KW - Collateral constraints
KW - Cost of business cycles
KW - precautionary saving
M3 - Working paper
T3 - CEPR Discussion Paper Series
BT - Kinks and Gains from Credit Cycles
ER -
ID: 222257122