source of uncertainty in a small open economy. We prove the existence of an optimal consumption path. We exploit that the …

Sovereign debt restructurings can be implemented preemptively - prior to a payment default. We code a comprehensive new … sovereign debt model that incorporates preemptive and post-default renegotiations. The model improves the fit with the data and … explains the sovereign’s optimal choice: preemptive restructurings occur when default risk is high ex-ante, while defaults …

shortage sell loans on the interbank market. Two equilibria emerge. In the no default equilibrium, all banks hold enough … reserves and remain solvent. In the mixed equilibrium, some banks default with positive probability. The former exists when …

to compensate for risk. Real ex-post returns averaged 7% annually across two centuries, including default episodes, major … and with the degree of credit risk in this market, as measured by historical default and recovery rates. Based on our …

for-profit institutions take on more educational debt, have worse labor market outcomes, and are more likely to default …-profit enrollment leads to more loans, higher loan amounts, an increased likelihood of borrowing, an increased risk of default and worse … labor market outcomes. Two-year for-profit students also take out more loans, have higher default rates and lower earnings …

default induced redistribution and costs due to income losses in the wake of a default. Their choice of short- versus long …-term debt affects default and rollover decisions by subsequent policy makers. The equilibrium maturity structure is shaped by … low, or a cross default more likely. These predictions are consistent with empirical evidence. …

We study a competitive model in which market incompleteness implies that debt-financed firms may default in some states … of nature and default may lead to the sale of the firms’ assets at fire sale prices when markets are illiquid. This … incompleteness is the only friction in the model and the only cost of default. The anticipation of such losses alone may distort …