Kinks and Gains from Credit Cycles
Publikation: Working paper › Forskning
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.
|Status||Udgivet - 29 jul. 2019|
|Navn||CEPR Discussion Paper Series|
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