Erschienen:
Cambridge, Mass: National Bureau of Economic Research, May 2016
Erschienen in:NBER working paper series ; no. w22264
Umfang:
1 Online-Ressource
Sprache:
Englisch
DOI:
10.3386/w22264
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
Anmerkungen:
Mode of access: World Wide Web
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Beschreibung:
This paper establishes the existence of multiple equilibria in infinite-horizon open- economy models in which the value of tradable and nontradable endowments serves as collateral. In this environment, the economy displays self-fulfilling financial crises in which pessimistic views about the value of collateral induces agents to deleverage. The paper shows that under plausible calibrations, there exist equilibria with underborrowing. This result stands in contrast to the overborrowing result stressed in the related literature. Underborrowing emerges in the present context because in economies that are prone to self-fulfilling financial crises, individual agents engage in excessive precautionary savings as a way to self-insure