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This paper studies the design of optimal contracts in dynamic environments where agents have private information that is persistent. In particular, I focus on a continuous time version of a benchmark insurance problem where a risk averse agent would like to borrow from a risk neutral lender to...
Persistent link: https://www.econbiz.de/10012772314
We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with models of...
Persistent link: https://www.econbiz.de/10013139968
We document cross-individual variation in U.S. credit card borrowing costs (APRs) that is large enough to explain … explain APR differences comparable to moving someone from the worst credit score decile to the best …
Persistent link: https://www.econbiz.de/10013081502
In an earlier paper, we showed that integrated individual accounts, allowing individuals to borrow against future pensions when they are unemployed, can be welfare increasing, because it allows increased inter-temporal consumption smoothing without attenuating incentives to search. Here, we...
Persistent link: https://www.econbiz.de/10013081509
justification for this pattern based on adverse selection that entrepreneurs face in credit markets. Individuals choose between …-subsidization in the credit market equilibrium results in excessive (insufficient) entry of low-skilled (high-skilled) agents into …
Persistent link: https://www.econbiz.de/10013065398
In many countries, bankruptcy is associated with low recovery by creditors. We develop a model of corporate credit … markets in such an environment. Corporate credit is provided by either a bond market or risk-averse banks. Restructuring of …
Persistent link: https://www.econbiz.de/10013076562
This paper is a theoretical study into how credit constraints interact with aggregate economic activity over the … not only factors of production, but they also serve as collateral for loans. Borrowers' credit limits are affected by the … prices of the collateralized assets. And at the same time, these prices are affected by the size of the credit limits. The …
Persistent link: https://www.econbiz.de/10012774940
Empirical evidence suggests that banks playa unique role in the savings-investment process, affecting firms' cost of capital and the level of investment. We argue that bank uniqueness is related to how the design of bank loan contracts allows banks to affect borrowers' choice of project risk....
Persistent link: https://www.econbiz.de/10012763460
assets, based almost entirely on a credit risk criterion. The paper provides both a theoretical and empirical framework for … credit risk. For example, our findings indicate that the RBC weights overpenalize home mortgages, which have an average … credit loss of 13 basis points, relative to commercial and consumer loans. The RBC rules also contain a significant bias …
Persistent link: https://www.econbiz.de/10012763732
currency and reduce net exports. Emerging market policy makers however believe that inflows lead to credit booms and rising … output, and the evidence appears to go their way. To reconcile theory and reality, we extend the set of assets included in …
Persistent link: https://www.econbiz.de/10013013930