This paper examines the role of collateral in sudden stop models that feature occasionally binding constraints and endogenous growth.It shows how different assumptions regarding the nature and valuation of collateral ...This paper examines the role of collateral in sudden stop models that feature occasionally binding constraints and endogenous growth.It shows how different assumptions regarding the nature and valuation of collateral alter the dynamics of crisis episodes and the welfare costs of pecuniary externalities.For example,in a model with land as collateral,valuing collateral at the“expected future price”leads to substantially weaker Fisherian deflation efects than the case with collateral valued at the“current price.”However,the average size of sudden stops in the two economies are similar because households endogenously avoid the region where large sudden stops would occur.The differences between different collateral valuations and the size of sudden stops are amplified when we abstract from endogenous growth.In another case,assuming collateral is income rather than land leads to smaller sudden stops as income is less volatile than asset prices.Finally,we show that some choices lead to constrained or conditionally eficient allocations whereas others generate inefficiencies,but these inefficienciesare small.展开更多
基金the National Natural Science Foundation of China(No.72063030,72141305)the Ministry of Education Social Sciences Foundation for Youths(No.20YJC790018)the Bankard Fund for Political Economy at the University of Virginia.
文摘This paper examines the role of collateral in sudden stop models that feature occasionally binding constraints and endogenous growth.It shows how different assumptions regarding the nature and valuation of collateral alter the dynamics of crisis episodes and the welfare costs of pecuniary externalities.For example,in a model with land as collateral,valuing collateral at the“expected future price”leads to substantially weaker Fisherian deflation efects than the case with collateral valued at the“current price.”However,the average size of sudden stops in the two economies are similar because households endogenously avoid the region where large sudden stops would occur.The differences between different collateral valuations and the size of sudden stops are amplified when we abstract from endogenous growth.In another case,assuming collateral is income rather than land leads to smaller sudden stops as income is less volatile than asset prices.Finally,we show that some choices lead to constrained or conditionally eficient allocations whereas others generate inefficiencies,but these inefficienciesare small.
