Occhino, Filippo - Federal Reserve Bank of Cleveland - 2014
This paper studies how a worsening of the debt overhang distortion on bank lending can explain banking solvency crises … that are accompanied by a plunge of bank asset values and by a severe contraction of lending and economic activity. Since … the value of bank assets depends on economic prospects, a pessimistic view of the economy can be self-fulfilling and can …