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We revisit the question of what determines the credibility of macroeconomic policies here, of promises to repay public debt. Almost all thinking on the issue has focused on governments' strategic decision to default (or erode the value of outstanding debt via inflation/devaluation). But...
Persistent link: https://www.econbiz.de/10012468765
We ask why so few student loan borrowers enroll in Income Driven Repayment when the majority would benefit from doing so. To do so we run an incentivized laboratory experiment using a facsimile of the government's Student Loan Exit Counseling website. We test the role information complexity,...
Persistent link: https://www.econbiz.de/10012480909
A central bank is insolvent if its plans imply a Ponzi scheme on reserves so the price level becomes infinity. If the central bank enjoys fiscal support, in the form of a dividend rule that pays out net income every period, including when it is negative, it can never become insolvent...
Persistent link: https://www.econbiz.de/10012457441
countercyclicality of bankruptcy filings found in U.S. data? Yes, it does, but only if we explicitly model recessions as displaying … bankruptcy risk discouraging households from using credit. This finding contradicts the intuition that access to credit helps …
Persistent link: https://www.econbiz.de/10012458048
In many countries, bankruptcy is associated with low recovery by creditors. We develop a model of corporate credit … insolvent firms happens out of court if in-court bankruptcy is inefficient, giving banks an advantage over bondholders. Riskier … borrowers will use bank loans anywhere, but also bonds when bankruptcy is efficient. The model matches empirical debt mix …
Persistent link: https://www.econbiz.de/10012459246
We develop a model in which, in order to provide managerial incentives, it is optimal to have costly bankruptcy. If … states in which resources lost to bankruptcy in the equilibrium without a government are largest …
Persistent link: https://www.econbiz.de/10012459471
Derivative contracts, swaps, and repos enjoy "super-senior" status in bankruptcy: they are exempt from the automatic …
Persistent link: https://www.econbiz.de/10012461058
This paper solves a dynamic model of a household's decision to default on its mortgage, taking into account labor income, house price, inflation, and interest rate risk. Mortgage default is triggered by negative home equity, which results from declining house prices in a low inflation...
Persistent link: https://www.econbiz.de/10012461141
This paper investigates the role that the entry and exit of heterogeneous firms plays in shaping aggregate fluctuations in economic activity. In so doing, it develops a dynamic stochastic general equilibrium model in which procyclical entry and countercyclical exit along a real business cycle...
Persistent link: https://www.econbiz.de/10012461225
theory, firms with higher bankruptcy costs, i.e., smaller firms and firms with lower asset tangibility, choose capital … structures with higher bankruptcy risk. Further analysis suggests that the capital structures of smaller firms with lower asset … shocks, making them more susceptible to bankruptcy risk …
Persistent link: https://www.econbiz.de/10012461367