Credit Constraints and Self-Fulfilling Business Cycles

• 成果类型: Article
• 署名作者: Liu, Zheng; Wang, Pengfei
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - San Francisco; Hong Kong University of Science & Technology
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.6.1.32
• 发表日期: 2014
• 页码: 32-69
• 关键词: Sunspot equilibria; indivisible labor; indeterminacy; fluctuations; COMPETITION; volatility; DYNAMICS; returns

摘要

We argue that credit constraints not only amplify fundamental shocks, they can also lead to self-fulfilling business cycles. We study a model with heterogeneous firms, in which imperfect contract enforcement implies that productive firms face binding credit constraints, with the borrowing capacity limited by expected equity value. A drop in equity value tightens credit constraints and reallocates resources from productive to unproductive firms. Such reallocation reduces aggregate productivity, further depresses equity value, generating a financial multiplier. Aggregate dynamics are isomorphic to those in a representative-agent economy with increasing returns. For sufficiently tight credit constraints, the model generates self-fulfilling business cycles.