European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

Investor borrowing heterogeneity in a Kiyotaki-Moore style macro model

Maria Teresa Punzi () and Katrin Rabitsch ()
Additional contact information
Maria Teresa Punzi: Department of Economics, Vienna University of Economics and Business
Katrin Rabitsch: Department of Economics, Vienna University of Economics and Business

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

JEL-codes: E32; E44 November 2014

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