Investor borrowing heterogeneity in a Kiyotaki-Moore style macro model

Katrin Rabitsch-Schilcher, Maria Teresa Punzi

Publication: Working/Discussion PaperWU Working Paper

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Abstract

We allow for heterogeneity in investors' ability to borrow from collateral in a Kiyotaki-Moore style macro model. We calibrate the model to match the quintiles of the distribution of leverage ratios of US non-financial firms. We show that financial amplification of the model with heterogeneous investors can be orders of magnitude higher, because of more pronounced asset price reactions.
Original languageEnglish
DOIs
Publication statusPublished - 1 Nov 2014

Publication series

SeriesDepartment of Economics Working Paper Series
Number189

WU Working Paper Series

  • Department of Economics Working Paper Series

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