Lin, Li; Tsomocos, Dimitrios P.; Vardoulakis, Alexandros - Federal Reserve Board (Board of Governors of the … - 2014
This paper assesses the role that monetary policy plays in the decision to default using a General Equilibrium model with collateralized loans, trade in fiat money and production. Long-term nominal loans are backed by collateral, the value of which depends on monetary policy. The decision to...