We ask two questions related to how access to credit affects the nature of business cycles. First, does the standard theory of unsecured credit account for the high volatility and procyclicality of credit and the high volatility and countercyclicality of bankruptcy filings found in U.S. data?...

Credit cards offer a limit, rather than a specific loan size, at a pre-approved interest rate. This paper studies the determination of these credit limits jointly with default in the presence of one-period debt. I adapt the standard incomplete markets macroeconomic model of one-period unsecured...

We study how credit scoring impacts the ability of individuals to consumption smooth. Our environment has ex-ante heterogeneity of household types. Credit scoring is interpreted as an intermediary's posterior of a household's type conditional on its bankruptcy and borrowing decisions. The...

This paper builds a simple theoretical model designed to study dollarization. Each period, a benevolent government decides whether or not to dollarize, how much to borrow or lend on an international bond market, and, if dollarization has not occurred, the devaluation rate. In equilibrium,...

This paper builds a dynamic model of borrowing and default to study the term structure of sovereign bonds in emerging markets. The borrower in the model can buy short and long bonds at contingent prices that reflect the timing of default events. The model generates a yield curve that is upward...

Central counterparties (CCPs) have increasingly become a cornerstone of financial markets infrastructure. We present a model where CCPs are necessary to implement efficient trade when trades are time-critical, liquidity is limited and there is limited enforcement of trades. We then show that --...

In the aftermath of sovereign defaults and financial crises in the 1990s, there have been calls for the widespread use by sovereigns of equity-like financial instruments, in particular, of GDP-indexed bonds. This paper calibrates a general equilibrium model with endogenous default to a typical...