Investor borrowing heterogeneity in a Kiyotaki-Moore style macro model

- We present a modification to the Kiyotaki-Moore collateral constraint model.
- We allow for heterogeneity in investors ability to borrow from collateral.
- We calibrate the model to the debt-ratio distribution of US non-financial firms.
- The heterogeneous investors model leads to stronger financial amplification.

We introduce heterogeneity in investors' ability to borrow from collateral in a Kiyotaki-Moore style macro model, calibrated to the quintiles of the leverage-ratio distribution of US non-financial firms. Financial amplification intensifies, because of stronger asset price reactions of highly levered investors.