Deterministic debt cycles in open economies with flow collateral constraints

2021 ◽  
Vol 192 ◽  
pp. 105195
Author(s):  
Stephanie Schmitt-Grohé ◽  
Martín Uribe
Keyword(s):  
Open Economies ◽  
Collateral Constraints

Multiple Equilibria in Open Economies with Collateral Constraints

2020 ◽  
Author(s):  
Stephanie Schmitt-Grohé ◽  
Martín Uribe
Keyword(s):  
Open Economy ◽  
Financial Crises ◽  
Multiple Equilibria ◽  
Infinite Horizon ◽  
Open Economies ◽  
Precautionary Savings ◽  
Related Literature ◽  
Collateral Constraints ◽  
Present Context ◽  
Open Economy Models

Abstract This article establishes the existence of multiple equilibria in infinite-horizon open economy models in which the value of tradable and non-tradable endowments serves as collateral. In this environment, the economy displays self-fulfilling financial crises in which pessimistic views about the value of collateral induce agents to deleverage. 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.

The Politics of Open Economies

1997 ◽  
Author(s):  
Alasdair Bowie ◽  
Daniel Unger
Keyword(s):  
Open Economies

Bubbles and Crises in Open Economies

2011 ◽  
Author(s):  
Henri Buchsteiner ◽  
Kirill Zavodov
Keyword(s):  
Open Economies
Sign in / Sign up

Export Citation Format

Share Document