Investor borrowing heterogeneity in a Kiyotaki–Moore style macro model

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. •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.