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SUMMARY:Capital in the Business Cycle: Renting versus Ownership - Gabor Pi
 nter
DTSTART:20120214T170000Z
DTEND:20120214T180000Z
UID:TALK36471@talks.cam.ac.uk
CONTACT:Sheryl Anderson
DESCRIPTION:This paper studies how business cycle dynamics are affected by
  the possibility to rent as opposed to own productive capital. We provide 
 empirical evidence based on firm-level data for the US which confirms the 
 counter-cyclicality of the share of renting in capital expenditure over th
 e business cycle. We develop a dynamic stochastic general equilibrium mode
 l with borrowing constraints and two types of agents\, and allow for both 
 owned and rented capital to be used in production. The model focuses on a 
 fundamental trade-off between the two types of capital: only owned capital
  can serve as collateral\, but owning requires more liquidity than renting
 . The model performs well in replicating the counter-cyclical behavior of 
 the rental share and matching some of the key business cycle moments obser
 ved in the data. Finally\, simulation results show that the presence of a 
 renting sector alleviates the adverse impacts of a negative financial shoc
 k\, and these results are confirmed by empirical cross-country evidence.
LOCATION:Lucia Windsor Room\, Newnham College
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