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default model. We find that a one-year standstill generates welfare gains for the sovereign equivalent to a permanent … consumption increase of between 0.1% and 0.3%, depending on the initial shock. However, except when it avoids a default, the …
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We model the expansion decision of a levered firm. Straight debt distorts both timing and scaling: the firm invests less and later than its all-equity financed counterpart. The inclusion of performance sensitivity in the debt contract mitigates such distortions. Moreover, performance sensitivity...
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