TY - JOUR
T1 - Financial constraints, endogenous markups, and self-fulfilling equilibria
AU - Benhabib, Jess
AU - Wang, Pengfei
N1 - Funding Information:
The authors thank the editor and referee for helpful comments. Pengfei Wang acknowledges financial support from Hong Kong Research Grant Council (Project 645811 ).
PY - 2013/10
Y1 - 2013/10
N2 - Self-fulfilling equilibria and indeterminacy can easily arise in a simple financial accelerator model with reasonable parameter calibrations and without increasing returns in production. A key feature for generating indeterminacy in our model is the countercyclical markup due to the procyclical loan-to-output ratio. We illustrate, via simulations, that our financial accelerator model can generate rich business cycle dynamics, including hump-shaped output in response to demand shocks as well as autocorrelation in output growth rates.
AB - Self-fulfilling equilibria and indeterminacy can easily arise in a simple financial accelerator model with reasonable parameter calibrations and without increasing returns in production. A key feature for generating indeterminacy in our model is the countercyclical markup due to the procyclical loan-to-output ratio. We illustrate, via simulations, that our financial accelerator model can generate rich business cycle dynamics, including hump-shaped output in response to demand shocks as well as autocorrelation in output growth rates.
KW - Endogenous markups
KW - Financial constraints
KW - Indeterminacy
KW - Self-fulfilling equilibria
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U2 - 10.1016/j.jmoneco.2013.06.004
DO - 10.1016/j.jmoneco.2013.06.004
M3 - Article
AN - SCOPUS:84886446738
VL - 60
SP - 789
EP - 805
JO - Carnegie-Rochester Confer. Series on Public Policy
JF - Carnegie-Rochester Confer. Series on Public Policy
SN - 0304-3932
IS - 7
ER -