Credit Cycles
1997/04/01 by Nobuhiro Kiyotaki, John Moore · 4,750 citations
Economics, Econometrics and Finance · #Asset (computer security) #Banking stability, regulation, efficiency #Collateral #Debt #Distribution (mathematics) #Dual (grammatical number) #Economic Theory and Policy #Economic theories and models #Economics #Finance #Microeconomics #Monetary economics #Production (economics)
paper · doi:10.1086/262072
published in Journal of Political Economy 105(2), 211-248 (University of Chicago Press)
openalex publication_date 1997/04/01 · openalex created_date 2022/05/12 · openalex updated_date 2026/08/06
Abstract
We construct a model of a dynamic economy in which lenders cannot force borrowers to repay their debts unless the debts are secured. In such an economy, durable assets play a dual role: not only are they factors of production, but they also serve as collateral for loans. The dynamic interaction between credit limits and asset prices turns out to be a powerful transmission mechanism by which the effects of shocks persist, amplify, and spill over to other sectors. We show that small, temporary shocks to technology or income distribution can generate large, persistent fluctuations in output and asset prices.
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