Pintus, Patrick A.; Wen, Yi - Federal Reserve Bank of St. Louis - 2008
This paper resuscitates the credit-cycle theory of Kiyotaki and Moore (1997) in a two-agent RBC model with conventional … generate large, highly persistent, dampened cycles in aggregate output. Key to our results is the interaction between credit … constraints and habit formation. Credit constraints based on collateralized assets mainly amplify the impact of shocks while habit …