. This model generates dynamic relationships between foreign capital inflows, domestic investment and domestic bank debt in … accumulation of bank debt and increasing concentration of domestic lending and investment to the anticipation of contingent … insurance and implicit government guarantees of foreign currency loans. The model links high pre-crisis growth rates, the …

accumulation process lead to fluctuations in the real returns from intermediated investment. For this economy, we find that the … output, investment is negatively correlated with output, variations in the capital stock are quite large and interest rates …

We analyze contagious sovereign debt crises in financially integrated economies. Under financial integration banks … optimally diversify their holdings of sovereign debt in an effort to minimize the costs with respect to an individual country …'s sovereign debt default. While diversification generates risk diversification benefits ex ante, it also generates contagion ex …

We analyze government interventions to alleviate debt overhang among banks. Interventions generate two types of rents …

Fire sales are forced sales of assets in which high-valuation bidders are sidelined, typically due to debt overhang … the presence of fire sales, and how fire sales can reduce productive investment. We conclude by showing how asset fire …