Format:
1 Online-Ressource (78 p)
Content:
This article explores the implications of borrower's side collateral constraints have on the real economy. The novel element in this model relative to the industry standard model is that I model the entrepreneurs, which are crucial for investment, as collateral constrained. The model is estimated using Bayesian methods and can be employed to measure the role of collateral. Regarding the results, I document that collateral requirements are highly volatile during the period of 2007–2012, and I find that the effect of an increase in collateral requirements is highly significant. Interestingly, the model assigns an important role for collateral in the shock decomposition, and the contribution of financial shocks is much marked during the financial crisis and substantially shapes macroeconomic fluctuations
Language:
English
DOI:
10.2139/ssrn.3980047
