This paper models the housing sector, mortgages and endogenous default in a DSGE setting with nominal and real rigidities. We use data for the period 1981-2006 to estimate our model using Bayesian techniques. We analyze how an increase in risk in the mortgage market raises the default rate and...

Greece is at a decisive moment. It has to choose between defaulting and an economic program of structural reforms, privatization, efficient tax collection, and shrinking of the public sector. Unilateral suspension of debt payments would be an economic catastrophe for Greeks, resulting in deep...

We analyze an exchange economy of unsecured credit where borrowers have the option to declare bankruptcy in which case they are temporarily excluded from financial markets. Endogenous credit limits are imposed that are just tight enough to prevent default. Economies with temporary exclusion...