We derive the effects of credit risk transfer (CRT) markets on real sector productivity and on the volume of financial intermediation in a model where banks choose their optimal degree of CRT and monitoring. We find that CRT increases productivity in the up-market real sector but decreases it in...

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,...

Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which grew with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group liability claims to improve repayment rates and lower...

This paper contributes to the economics of financial institutions risk management by exploring how loan securitization affects their default risk, their systematic risk, and their stock prices. In a typical CDO transaction a bank retains through a first loss piece a very high proportion of the...

I study whether self-fulfilling bank runs can occur when banks use sophisticated contracts and withdrawal decisions are public information. In a finite-agent version of Diamond and Dybvig (1983) with correlated types, I first present an example in which a bank run perfect Bayesian equilibrium...

This paper measures how both geographical and cultural proximity of bank branches affect household credit choice and pricing. We examine both types of proximity jointly to separately identify the importance of soft information versus alternative mechanisms. Using a detailed household-level...

The objective of this research is to examine the inter-bank network of clients as a channel for credit risk transmission by groups of banks in Serbia characterized by different levels of credit risk (clusters). Two of the four observed groups of banks have experienced increase in NPLs through...

During the last years the relationship between financial development and economic growth has received widespread attention in the literature on growth and development. This paper summarises in its first part the results of this research, stressing the growth-enhancing effects of an increased...

The paper analyzes how the removal of barriers to entry in banking affect loan competition, bank stability and economic welfare. We consider a model of spatial loan competition where a market that is served by less efficient banks is opened to entry by banks that are more efficient in screening...

We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow banks to have private information about the risk of their assets. We show how banks’ asset risk affects funding liquidity in the interbank market. Several interbank market...