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Department of Economics, WU (Wirtschaftsuniversität Wien) Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)

No 189:
Investor borrowing heterogeneity in a Kiyotaki-Moore style macro model

Maria Teresa Punzi () and Katrin Rabitsch ()

Abstract: We allow for heterogeneity in investors’ ability to borrow from collateral in a Kiyotaki- Moore style macro model. We calibrate the model to match the quintiles of the distribution of leverage ratios of US non-financial firms. We show that financial amplification of the model with heterogeneous investors can be orders of magnitude higher, because of more pronounced asset price reactions.

Keywords: Collateral Constraints, Leverage, Heterogeneity, Financial Amplification; (follow links to similar papers)

JEL-Codes: E32,; E44; (follow links to similar papers)

November 2014

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