In the course of ordinary business, commercial banks frequently encounter entrepreneurs seeking loans for the purpose …

Default probabilities and recovery rate densities are not constant over the credit cycle; yet many models assume that … they are. This paper proposes and estimates a model in which these two variables depend on an unobserved credit cycle … static approach. The model indicates that ignoring the dynamic nature of credit risk could lead to a severe underestimation …

Many economists argue that the primary economic function of banks is to provide cheap credit, and to facilitate this … to market equilibria in which cheap credit is inappropriately emphasized over project screening. Restrictions on … collateral requirements and the protection of debtors in bankruptcy proceedings may redress this imbalance and increase credit …

Creditors often share information about their customers' credit records. Besides helping them to spot bad risks, this … default on one lender would disrupt their credit rating with all the other lenders. This increases their incentive to perform …

that otherwise would have had a unique, stationary equilibrium. Some new results about the dynamics of credit rationing are …