Abstract
This paper introduces imperfect knowledge and learning behavior of economic agents into the Kiyotaki and Moore model and studies the interaction of agents' collateral price beliefs, collateral constraint, and aggregate economic activity over the business cycle. It establishes the E-stability condition and the convergence of the real time learning process. In addition, it shows that learning strengthens the role of collateral constraints in aggregate fluctuations.
| Original language | English |
|---|---|
| Pages (from-to) | 845-855 |
| Number of pages | 11 |
| Journal | Macroeconomic Dynamics |
| Volume | 20 |
| Issue number | 3 |
| Early online date | 17 Oct 2014 |
| DOIs | |
| Publication status | Published - Apr 2016 |