Household borrowing constraints and monetary policy in emerging economies
Autor(a) principal: | |
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Data de Publicação: | 2015 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Institucional do FGV (FGV Repositório Digital) |
Texto Completo: | http://hdl.handle.net/10438/13463 |
Resumo: | Credit markets in emerging economies can be distinguished from those in advanced economies in many respects, including the collateral required for households to borrow. This work proposes a DSGE framework to analyze one peculiarity that characterizes the credit markets of some emerging markets: payroll-deducted personal loans. We add the possibility for households to contract long-term debt and compare two different types of credit constraints with one another, one based on housing and the other based on future income. We estimate the model for Brazil using a Bayesian technique. The model is able to solve a puzzle of the Brazilian economy: responses to monetary shocks at first appear to be strong but dissipate quickly. This occurs because income – and the amount available for loans – responds more rapidly to monetary shocks than housing prices. To smooth consumption, agents (borrowers) compensate for lower income and for borrowing by working more hours to repay loans and erase debt in a shorter time. Therefore, in addition to the income and substitution effects, workers consider the effects on their credit constraints when deciding how much labor to supply, which becomes an additional channel through which financial frictions affect the economy. |
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Arruda, GustavoLima, Daniela Cunha deTeles, Vladimir KuhlEscolas::EESP2015-03-02T12:18:42Z2015-03-02T12:18:42Z2015-03-02TD 375http://hdl.handle.net/10438/13463Credit markets in emerging economies can be distinguished from those in advanced economies in many respects, including the collateral required for households to borrow. This work proposes a DSGE framework to analyze one peculiarity that characterizes the credit markets of some emerging markets: payroll-deducted personal loans. We add the possibility for households to contract long-term debt and compare two different types of credit constraints with one another, one based on housing and the other based on future income. We estimate the model for Brazil using a Bayesian technique. The model is able to solve a puzzle of the Brazilian economy: responses to monetary shocks at first appear to be strong but dissipate quickly. This occurs because income – and the amount available for loans – responds more rapidly to monetary shocks than housing prices. To smooth consumption, agents (borrowers) compensate for lower income and for borrowing by working more hours to repay loans and erase debt in a shorter time. Therefore, in addition to the income and substitution effects, workers consider the effects on their credit constraints when deciding how much labor to supply, which becomes an additional channel through which financial frictions affect the economy.engEESP- Textos para Discussão;TD 375Credit constrainsEmerging marketsMonetary policyEconomiaEconomiaHousehold borrowing constraints and monetary policy in emerging economiesinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articlereponame:Repositório Institucional do FGV (FGV Repositório Digital)instname:Fundação Getulio Vargas (FGV)instacron:FGVinfo:eu-repo/semantics/openAccessORIGINALTD 375 - Gustavo Arruda - Daniela Lima - Vladimir K. 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dc.title.eng.fl_str_mv |
Household borrowing constraints and monetary policy in emerging economies |
title |
Household borrowing constraints and monetary policy in emerging economies |
spellingShingle |
Household borrowing constraints and monetary policy in emerging economies Arruda, Gustavo Credit constrains Emerging markets Monetary policy Economia Economia |
title_short |
Household borrowing constraints and monetary policy in emerging economies |
title_full |
Household borrowing constraints and monetary policy in emerging economies |
title_fullStr |
Household borrowing constraints and monetary policy in emerging economies |
title_full_unstemmed |
Household borrowing constraints and monetary policy in emerging economies |
title_sort |
Household borrowing constraints and monetary policy in emerging economies |
author |
Arruda, Gustavo |
author_facet |
Arruda, Gustavo Lima, Daniela Cunha de Teles, Vladimir Kuhl |
author_role |
author |
author2 |
Lima, Daniela Cunha de Teles, Vladimir Kuhl |
author2_role |
author author |
dc.contributor.unidadefgv.por.fl_str_mv |
Escolas::EESP |
dc.contributor.author.fl_str_mv |
Arruda, Gustavo Lima, Daniela Cunha de Teles, Vladimir Kuhl |
dc.subject.por.fl_str_mv |
Credit constrains Emerging markets Monetary policy |
topic |
Credit constrains Emerging markets Monetary policy Economia Economia |
dc.subject.area.por.fl_str_mv |
Economia |
dc.subject.bibliodata.por.fl_str_mv |
Economia |
description |
Credit markets in emerging economies can be distinguished from those in advanced economies in many respects, including the collateral required for households to borrow. This work proposes a DSGE framework to analyze one peculiarity that characterizes the credit markets of some emerging markets: payroll-deducted personal loans. We add the possibility for households to contract long-term debt and compare two different types of credit constraints with one another, one based on housing and the other based on future income. We estimate the model for Brazil using a Bayesian technique. The model is able to solve a puzzle of the Brazilian economy: responses to monetary shocks at first appear to be strong but dissipate quickly. This occurs because income – and the amount available for loans – responds more rapidly to monetary shocks than housing prices. To smooth consumption, agents (borrowers) compensate for lower income and for borrowing by working more hours to repay loans and erase debt in a shorter time. Therefore, in addition to the income and substitution effects, workers consider the effects on their credit constraints when deciding how much labor to supply, which becomes an additional channel through which financial frictions affect the economy. |
publishDate |
2015 |
dc.date.accessioned.fl_str_mv |
2015-03-02T12:18:42Z |
dc.date.available.fl_str_mv |
2015-03-02T12:18:42Z |
dc.date.issued.fl_str_mv |
2015-03-02 |
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info:eu-repo/semantics/publishedVersion |
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info:eu-repo/semantics/article |
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article |
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http://hdl.handle.net/10438/13463 |
dc.identifier.sici.none.fl_str_mv |
TD 375 |
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TD 375 |
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http://hdl.handle.net/10438/13463 |
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eng |
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dc.relation.ispartofseries.por.fl_str_mv |
EESP- Textos para Discussão;TD 375 |
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info:eu-repo/semantics/openAccess |
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openAccess |
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