Collateralized capital and news-driven cycles

Keiichiro Kobayashi, Kengo Nutahara

Research output: Contribution to journalArticle

Abstract

Kobayashi, Nakajima, and Inaba (2007) show that in the neoclassical business cycle models with collateral constraints, a boom can be generated in response to an optimistic change in expectations on the future state of the economy. They call this business cycle a news-driven cycle. In their models, land is used as collateral, and borrowing for working capital is limited by the value of collateralized land. We simplify their model to the one without land. We show that in the economy where capital goods are used as collateral, the news-driven cycles can be generated.

Original languageEnglish
JournalEconomics Bulletin
Volume5
Issue number17
Publication statusPublished - 2007 Sep 27

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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    Kobayashi, K., & Nutahara, K. (2007). Collateralized capital and news-driven cycles. Economics Bulletin, 5(17).