Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211877 
Authors: 
Year of Publication: 
2000
Series/Report no.: 
Bank of Finland Discussion Papers No. 23/2000
Publisher: 
Bank of Finland, Helsinki
Abstract: 
This paper presents a new approach to modelling credit restrictions by considering uncertain access to the asset market.The asset market and the stochastic process governing access are considered fully exogenous and independent of income.The model generates stable debt trajectories for a broader array of interest rate levels than the one corresponding to the agent's rate of time preference.The agent exhibits excess sensitivity of consumption to current period income, even for low probabilities of constraints. Because this sensitivity is inversely related to the maturity of debt contracts, the availability of long-term debt contracts reduces the income-sensitivity of consumption.A very tractable approximative Euler equation for the model is presented.
Persistent Identifier of the first edition: 
ISBN: 
951-686-697-2
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.