Replication data for: Overborrowing and Systemic Externalities in the Business Cycle
- Bianchi, Javier
AbstractCredit constraints linking debt to market-determined prices embody a systemic credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. This externality arises because private agents fail to internalize the financial amplification effects of carrying a large amount of debt when credit constraints bind. We conduct a quantitative analysis of this externality in a two-sector dynamic stochastic general equilibrium (DSGE) model of a small open economy calibrated to emerging markets. Raising the cost of borrowing during tranquil times restores constrained efficiency and significantly reduces the incidence and severity of financial crises. (JEL: E13, E32, E44, F41, G01)
Is supplement to
DOI: 10.1257/aer.101.7.3400 (Text)
Bianchi, Javier. “Overborrowing and Systemic Externalities in the Business Cycle.” American Economic Review 101, no. 7 (December 2011): 3400–3426. https://doi.org/10.1257/aer.101.7.3400.
- ID: 10.1257/aer.101.7.3400 (DOI)
Update Metadata: 2020-05-18 | Issue Number: 2 | Registration Date: 2019-10-11