Credit Constraints and Self-Fulfilling Business Cycles

We argue that credit constraints not only amplify fundamental shocks, they can also lead to self-fulfilling business cycles. We study a model with heterogeneous firms, in which imperfect contract enforcement implies that productive firms face binding credit constraints, with the borrowing capacity limited by expected equity value. A drop in equity value tightens credit constraints and reallocates resources from productive to unproductive firms. Such reallocation reduces aggregate productivity, further depresses equity value, generating a financial multiplier. Aggregate dynamics are isomorphic to those in a representative-agent economy with increasing returns. For sufficiently tight credit constraints, the model generates self-fulfilling business cycles. (JEL E13, E32, E44)

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Peculiarities of Modern Dynamics of the Global Economy

Voprosy Ekonomiki ◽

10.32609/0042-8736-2010-9-78-92 ◽

2010 ◽

pp. 78-92 ◽

Cited By ~ 1

Author(s):

V. Klinov

Keyword(s):

Economic Growth ◽

Economic Development ◽

Business Cycles ◽

Global Economy ◽

Long Waves ◽

Rapid Expansion ◽

Business Taxation ◽

Modern World ◽

China And India ◽

World Economic

Rates and factors of modern world economic growth and the consequences of rapid expansion of the economies of China and India are analyzed in the article. Modification of business cycles and long waves of economic development are evaluated. The need of reforming business taxation is demonstrated.

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Institutions as the Ordering Factor and as the Destabilizing Force: New Institutional and Post Keynesian Perspectives

Voprosy Ekonomiki ◽

10.32609/0042-8736-2006-8-102-118 ◽

2006 ◽

pp. 102-118 ◽

Cited By ~ 3

Author(s):

A. Skorobogatov

Keyword(s):

Economic Policy ◽

Business Cycles ◽

Institutional Theory ◽

Institutional Environment ◽

Institutional Arrangements ◽

Economic Stability ◽

Forward Contracts

The paper is dedicated to the New Institutional and Post Keynesian perspectives on institutions and their relation to economic stability. Embeddedness, institutional environment, and institutional arrangements are considered. Within these institutions conventional expectations, the economic policy and forward contracts are analyzed. Upon these perspectives the author shows a contradictory relation between institutions and the order and develops an institutional theory of business cycles.

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Credit constraints and Rural Migration: Evidence from Six Villages in Uttar Pradesh

MIGRATION LETTERS ◽

10.33182/ml.v15i3.360 ◽

2018 ◽

Vol 15 (3) ◽

pp. 389-398

Author(s):

Ruchi Singh

Keyword(s):

Credit Constraints ◽

Uttar Pradesh ◽

Binary Logistic Regression ◽

Binary Logistic Regression Model ◽

Male Migration ◽

Rural Economies ◽

And Migration ◽

The Relationship ◽

The Empirical Analysis

Rural economies in developing countries are often characterized by credit constraints. Although few attempts have been made to understand the trends and patterns of male out-migration from Uttar Pradesh (UP), there is dearth of literature on the linkage between credit accessibility and male migration in rural Uttar Pradesh. The present study tries to fill this gap. The objective of this study is to assess the role of credit accessibility in determining rural male migration. A primary survey of 370 households was conducted in six villages of Jaunpur district in Uttar Pradesh. Simple statistical tools and a binary logistic regression model were used for analyzing the data. The result of the empirical analysis shows that various sources of credit and accessibility to them play a very important role in male migration in rural Uttar Pradesh. The study also found that the relationship between credit constraints and migration varies across various social groups in UP.

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