Albuquerque, Rui; Hopenhayn, Hugo A. - In: Review of Economic Studies 71 (2004) 2, pp. 285-315
We develop a general model of lending in the presence of endogenous borrowing constraints. Borrowing constraints arise because borrowers face limited liability and debt repayment cannot be perfectly enforced. In the model, the dynamics of debt are closely linked with the dynamics of borrowing...
