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We study a production economy with multiple sectors financed by issuing securities to agents who face capital constraints. Binding capital constraints propagate business cycles, and a reduction of the interest rate can increase the required return of high-haircut assets since it can increase the...
Persistent link: https://www.econbiz.de/10013138470
We study a production economy with multiple sectors financed by issuing securities to agents who face capital constraints. Binding capital constraints propagate business cycles, and a reduction of the interest rate can increase the required return of high-haircut assets since it can increase the...
Persistent link: https://www.econbiz.de/10012462319
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when the borrowing constraint is binding. More significantly, our results do not depend on the - liquidity or collateral … probability. Because credit and bubble are no more perfectly substitutable assets, the liquidity and collateral roles of the … role of the bubble, used to provide liquidities or as collateral in a borrowing constraint. In this paper, we introduce …
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