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We study the process of growth and business cycles in an open economy which has access to international ¯nancial markets. The ¯nancial market imperfection originates from costly state veri¯cation and a positive probability of default on loans. The degree of credit market imperfection is...
Persistent link: https://www.econbiz.de/10010301188
The standard situation of ex post information asymmetry between borrowers and lenders is extended by risk aversion and heterogenous levels of reservation utility of lenders. In a situation of direct contracting optimal incentive compatible contracts are valuable for both, borrowers and lenders....
Persistent link: https://www.econbiz.de/10010263027
Microcredit, a financial tool providing uncollateralized loans to low-income individuals, has seen a shift from joint-liability (JL) to individual liabil- ity (IL) lending models. This article tests a theory explaining this shift, focusing on borrowers matching into groups exposed to similar...
Persistent link: https://www.econbiz.de/10015211873
I examine the role of intermediaries on the world's largest peer-to-peer online lending platform. This marketplace as well as other recently opened lending websites allow people to auction microcredit over the internet and are in line with the disintermediation in financial transactions through...
Persistent link: https://www.econbiz.de/10011772333
Persistent link: https://www.econbiz.de/10013359340
The number of firm bankruptcies is surprisingly low in economies with poor institutions. We study a model of bank-firm relationship and show that the bank's decision to liquidate bad firms has two opposing effects. First, the bank receives a payoff if a firm is liquidated. Second, it loses the...
Persistent link: https://www.econbiz.de/10010261107
Why do banks remain passive? In a model of bank-firm relationship we study the trade-off a bank faces when having defaulting firms declared bankrupt. First, the bank receives a payoff if a firm is liquidated. Second, it provides information about a firm's type to its competitors. Thereby,...
Persistent link: https://www.econbiz.de/10010264275
Money markets have two functions, the allocation of liquidity and the processing of information. We develop a model that allows us to evaluate the efficiency of different money market derivatives regarding these two objectives. We assume that due to its size, a large bank receives a more precise...
Persistent link: https://www.econbiz.de/10010295919
The number of firm bankruptcies is surprisingly low in economies with poor institutions. We study a model of bank-firm relationship and show that the bank?s decision to liquidate bad firms has two opposing effects. First, the bank receives a payoff if a firm is liquidated. Second, it loses the...
Persistent link: https://www.econbiz.de/10010295971
Empirical evidence suggests that banks often engage in refinancing of intrinsically insolvent debtors instead of writing of their non-performing loans. Such forbearance lending may induce soft budget constraints for the debtors, as it diminishes their incentives to thwart default. This paper...
Persistent link: https://www.econbiz.de/10010301816