This paper compares the equilibrium dynamics of an economy facing an aggregate collateral constraint on external debt … central finding of the paper is that the economy with the aggregate borrowing limit does not generate higher levels of debt …

and borrowers ample reason to care whether nonperforming debts are restructured. One implication of the way in which debt … argument is moral hazard, but (unlike in much of the recent literature of emerging market debt problems) what is central here …

We analyze the role of debt in persuading an entrepreneur to pay out cash flows, rather than to divert them. In the … first part of the paper we study the optimal debt contract -- specifically, the trade-off between the size of the loan and … the repayment -- under the assumption that some debt contract is optimal. In the second part we consider a more general …

shadow banks, (iii) strategic complementarities and amplification, (iv) debt contracts and the distinction between solvency … and liquidity, (v) the diabolic loop, (vi) regional flights to safety, and (vii) unconventional monetary policy. We apply …

We build a macroeconomic model that centers on liquidity transformation in the financial sector. Intermediaries … maximize liquidity creation by issuing securities that are money-like in normal times but become illiquid in a crash when … collateral is scarce. We call this process shadow banking. A rise in uncertainty raises demand for crash-proof liquidity, forcing …

rates in the interbank market, and lower stock-market performance during liquidity stress …

funding in debt instruments (instead of loans) or cross-border (instead of domestically) was not significantly related to …

We investigate the transmission of central bank liquidity to bank deposits and loan spreads in Europe over the period … bank liquidity does not translate into lower loan spreads for high-risk banks for maturities beyond one year, even as it …

Fire sales are forced sales of assets in which high-valuation bidders are sidelined, typically due to debt overhang … sales shed light on several aspects of the recent financial crisis, and can account for the success of the liquidity …