TY  - JOUR
AU  - Uribe,Martín
TI  - Individual Versus Aggregate Collateral Constraints and the Overborrowing Syndrome
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12260
PY  - 2006
Y2  - May 2006
UR  - http://www.nber.org/papers/w12260
L1  - http://www.nber.org/papers/w12260.pdf
N1  - Author contact info:
Martin Uribe
Department of Economics
Columbia University
International Affairs Building
New York, NY 10027
Tel: 212 851 4008
Fax: 212 854 8059
E-Mail: martin.uribe@columbia.edu
M2  - featured in NBER digest on 2006-05-29
AB  - This paper compares the equilibrium dynamics of an economy facing an aggregate collateral constraint on external debt to the dynamics of an economy facing a collateral constraint imposed at the level of each individual agent. The aggregate collateral constraint is intended to capture an environment in which foreign investors base their lending decisions predominantly upon macro indicators as opposed to individual abilities to pay. Individual agents do not internalize the aggregate borrowing constraint. Instead, in this economy a country interest-rate premium emerges to clear the financial market. The central finding of the paper is that the economy with the aggregate borrowing limit does not generate higher levels of debt than the economy with the individual borrowing limit. That is, there is no overborrowing in equilibrium.
ER  -