Magill, Michael; Quinzii, Martine - In: Journal of Economic Dynamics and Control 51 (2015) C, pp. 111-132
This paper uses the framework of an OLG economy with three-period lived agents in which a durable good serves as collateral for loans, to study the effect of an unanticipated income shock when the economy is in a steady state equilibrium. We focus on the consequence of default on loans when the...