Catão, Luis A.V.; Fostel, Ana; Kapur, Sandeep - In: Journal of Development Economics 89 (2009) 2, pp. 271-284
We show how vicious circles in countries' credit histories arise in a model where output persistence is coupled with asymmetric information about output shocks. In such an environment, default signals the borrower's vulnerability to adverse shocks and creates a pessimistic growth outlook. This...