Using comparable survey data from twelve European countries we investigate households' attitudes towards mortgage indebtedness. We find that a given debt burden creates much higher distress in Southern countries, France and Belgium, where fewer households have a mortgage outstanding relative to...

This article explains how debt markets have malfunctioned in the crisis, with deleterious consequences for the real economy. I begin with a quick overview of debt markets. I then discuss three areas that are crucial in all debt markets decisions: risk capital and risk aversion, repo financing...

This article describes important determinants of the current financial crisis. In particular, the text focuses on the bounded rationality of banks which contributes to the credit cycle. The credit cycle is the mechanism that links the present financial crisis with earlier crisis. Shortcomings on...

Negative shocks to housing, most households’ largest consumption good, are expected to create strong credit demand to smooth these shocks over time. We estimate and trace a credit demand curve for households who recently experienced a negative shock to their housing stock. We use...

We develop a tractable general equilibrium model to analyze credit risk sharing via credit default swaps (CDS) and CDS market regulation under aggregate uncertainty. If available equity capital is below a threshold, any equilibrium of the basic economy with no CDS markets features firm default...