Guerrieri, Veronica; Lorenzoni, Guido - In: Econometrica 77 (2009) 6, pp. 1751-1790
In this paper, we build a model where the presence of liquidity constraints tends to magnify the economy's response to aggregate shocks. We consider a decentralized model of trade, where agents may use money or credit to buy goods. When agents do not have access to credit and the real value of...