This paper analyzes how debt forgiveness and exchange offers resolve inefficiencies associated with debt overhang in a dynamic setting. In a static model debt forgiveness and exchange offers are equivalent -- in a dynamic model they are not. Debt forgiveness is feasible as a means to restructure...

Detecting whether banks' leverage is indeed procyclical is relevant to support the view that booms and crises may be reinforced by some sort of supply side financial accelerator, whilst finding a plausible explanation of banks' behaviour is crucial to trace the road for a sensible reform of...