The authors examine the effect of a trade-off between shared credit risk and liquidity efficiency, among participants … credit limits (BCLs) to a participant at risk of imminent closure. The authors' analysis considers a network of three banks … includes the value of network externalities, the analysis shows that, when the expected credit loss is sufficiently low, an …

Understanding the nature of credit risk has important implications for financial stability. Since authorities notably … difficulty lies in finding reliable measures of aggregate credit risk in the economy, as opposed to firmlevel credit risk. In … this paper, the authors examine two models recently developed for this purpose: a reduced-form model applied to credit …

This paper proposes a theoretical framework to analyze the relationship between credit shocks, firm defaults and … volatility, and to study the impact of credit shocks on business cycle dynamics. Firms are identical ex ante but differ ex post … economy. A positive credit shock, defined as a rise in the loan-to-deposit ratio, increases output, consumption, hours and …

-tier network and the availability of public credit history. Furthermore, the welfare effects of clearing agent failure can be …