Many assets derive their value not only from future cash flows but also from their ability to serve as collateral. In … this paper, we investigate this collateral value and its impact on asset returns in an infinite-horizon general equilibrium … model with heterogeneous agents facing collateral constraints for borrowing. We document that borrowing against collateral …

We decompose aggregate consumption by modelling both savers and their links to collateral constrained borrowers through … proportion to the riskiness of assets, the demand for loans, the asset price and the quantity of housing collateral. We show that …

labor income channel. With financially constrained households in the model, a collateral channel strengthens the spillover …