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A tale of two commitments: equilibrium default and temptation

Nakajima, Makoto - Federal Reserve Bank of Philadelphia - 2013

I construct the life-cycle model with equilibrium default and preferences featuring temptation and self-control. The … effect is positive in the no-temptation model. As for the optimal default punishment, welfare of the agents without … lower default premium. On the other hand, welfare of agents with temptation is maximized when weak punishment leads to a …

Persistent link: https://www.econbiz.de/10010732485

Assessing bankruptcy reform in a model with temptation and equilibrium default

Nakajima, Makoto - Federal Reserve Bank of Philadelphia - 2015

A life-cycle model with equilibrium default in which consumers with and without temptation coexist is constructed to … default premia and better consumption smoothing. However, those who borrow and default due to temptation or unavoidable large …

Persistent link: https://www.econbiz.de/10011196367

Credit, bankruptcy, and aggregate fluctuations

Nakajima, Makoto; Rios-Rull, Jose-Victor - Federal Reserve Bank of Philadelphia - 2014

We ask two questions related to how access to credit affects the nature of business cycles. First, does the standard theory of unsecured credit account for the high volatility and procyclicality of credit and the high volatility and countercyclicality of bankruptcy filings found in U.S. data?...

Persistent link: https://www.econbiz.de/10010941009

Do student loan borrowers opportunistically default? Evidence from bankruptcy reform

Darolia, Rajeev; Ritter, Dubravka - Federal Reserve Bank of Philadelphia - 2015

Bankruptcy reform in 2005 eliminated debtors’ ability to discharge private student loan debt in bankruptcy. This law aimed to reduce costly defaults by diminishing the perceived incentive of some private student loan borrowers to declare bankruptcy even if they had sufficient income to service...

Persistent link: https://www.econbiz.de/10011249449

Recourse and residential mortgages: the case of Nevada

Li, Wenli; Oswald, Florian - Federal Reserve Bank of Philadelphia - 2014

affected lenders’ decisions to grant mortgages and borrowers’ decisions to apply for them and subsequently default. Using … change. Furthermore, the law change did not appear to have affected borrowers’ default decisions. These results cast a …

Persistent link: https://www.econbiz.de/10011124400