A Model of Borrower Reputation as Intangible Collateral

44 Pages Posted: 21 Nov 2012

Date Written: October 22, 2012


In this paper, we build a Kiyotaki-Moore style collateral amplification framework which generates large endogenous fluctuations in the leverage available to investing firms. We assume that defaulting borrowers lose not only their tangible collateral but also their future debt market access. The possibility of such market exclusion can lead to the emergence of intangible collateral in equilibrium alongside the tangible collateral which is usually studied in the literature. Fluctuations in the value of intangible collateral are isomorphic to fluctuations in the down payments they need to make in their purchases of productive assets. This modification of the Kiyotaki-Moore model substantially increases its amplification of exogenous shocks.

Keywords: collateral constraints, aggregate fluctuations

JEL Classification: E44

Suggested Citation

Nikolov, Kalin, A Model of Borrower Reputation as Intangible Collateral (October 22, 2012). ECB Working Paper No. 1490, Available at SSRN: https://ssrn.com/abstract=2165190

Kalin Nikolov (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics