Land Price, Collateral and Economic Growth

Abstract

This paper extends Kiyotaki and Moore's (1997) to an endogenous growth model and investigates the dynamic properties of a growing economy with binding credit constraint when land is used not only as an input of production but also as collateral. There exists a balanced growth path in an economy with binding credit constraint. In response to a once and for all productivity shock, the developed model shows the propagation mechanism among output, capital, bank credit and the land price in terms of the growth rate. The model's tractability allows us to derive interesting qualitative and quantitative findings on business cycles.j ere_434 473..489 JEL Classification Numbers: G30, O40.

Understanding Benign Liquidity Traps: The Case of Japan

“…Following Hellwig's (1981) original theoretical treatment, many authors have studied the interaction of credit constraints, collateral requirements and asset prices. Kiyotaki and Moore (1997) and Sakuragawa and Sakuragawa (2009) examine credit constraints in moneyless models, Ogawa and Suzuki (1998) study an interesting partial equilibrium model with such a constraint and Ara ujo et al (2015) analyze collateral equilibria in pure exchange economies. Kiyotaki and Moore (1997) and Sakuragawa and Sakuragawa (2009) examine credit constraints in moneyless models, Ogawa and Suzuki (1998) study an interesting partial equilibrium model with such a constraint and Ara ujo et al (2015) analyze collateral equilibria in pure exchange economies.…”

“…Geanakoplos (1996Geanakoplos ( , 2014 considers leverage cycles as self-reinforcing interplays between credit capacities and collateral values. Kiyotaki and Moore (1997) and Sakuragawa and Sakuragawa (2009) examine credit constraints in moneyless models, Ogawa and Suzuki (1998) study an interesting partial equilibrium model with such a constraint and Ara ujo et al (2015) analyze collateral equilibria in pure exchange economies. Eggertsson and Mehrotra (2014) presented a model of secular stagnation that differs from the present one in two crucial respects: First, the mentioned authors consider credit constraints that restrict household borrowing, whereas this paper concentrates on credit limits for firms.…”