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In an economy with financial imperfections, Ricardian equivalence holds when prices are flexible and the steady-state distribution of consumption is uniform, or labor is inelastic. With different steady-state consumption levels, Ricardian equivalence fails, but tax cuts, somewhat paradoxically,...
Persistent link: https://www.econbiz.de/10011084445
This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a multiperiod logit approach on a panel data set for all incorporated Swedish businesses over 1990-2002, we...
Persistent link: https://www.econbiz.de/10005504257
We present a model in which issuers of asset backed securities choose to release coarse information to enhance the liquidity of their primary market, at the cost of reducing secondary market liquidity or even causing it to freeze. The degree of transparency is inefficiently low if the social...
Persistent link: https://www.econbiz.de/10005504512
. Similarly, although firms with higher cash reserves are less likely to default over short horizons, endogenously determined … liquidity may be related positively to the longer-term probability of default. Our empirical analysis confirms these predictions …
Persistent link: https://www.econbiz.de/10004980203
We develop a sovereign debt model with official and private creditors where default risk depends on both the level and … presence of long-term debt overhang, the availability of official funds increases the probability of default on existing debt …, although default does not trigger exclusion from private credit markets. These findings help shed light on joint default and …
Persistent link: https://www.econbiz.de/10011083544
We document that the global scope and depth of the crisis the began with the collapse of the subprime mortgage market in the summer of 2007 is unprecedented in the post World War II era and, as such, the most relevant comparison benchmark is the Great Depression (or the Great Contraction, as...
Persistent link: https://www.econbiz.de/10011083815
shortage sell loans on the interbank market. Two equilibria emerge. In the no default equilibrium, all banks hold enough … reserves and remain solvent. In the mixed equilibrium, some banks default with positive probability. The former exists when …
Persistent link: https://www.econbiz.de/10011083957
Sovereign yield spreads within currency unions may reflect the risk of outright default. Yet, if exit from the currency … country of a currency union, allowing both for default within and exit from the union. Initially, the government runs … point, giving rise to default and currency risk. Second, the macroeconomic implications of both sources of risk differ …
Persistent link: https://www.econbiz.de/10011084136
-specific fiscal shocks. Differences in the cyclicality of fiscal revenues affect the option value of borrowing and resulting default …
Persistent link: https://www.econbiz.de/10011084395
favorable loan package; that it is associated with over-investment even when investment does not create collateral; and that low …
Persistent link: https://www.econbiz.de/10011145392