Most discussions of the Greek debt overhang have focussed on the implications for Greece. We show that when additional funds released to the debtor (Greece), via debt restructuring, are used efficiently in pursuit of a practicable business plan, then both debtor and creditor can benefit. We...

This article addresses the question of how competition for investments among firms in a certain industry impacts their capital structure. We develop a new modelling framework, which simulates financial variables of a set of firms in a given sector. We use it to analyse how firms are competing...

We investigate the consequences of excessive international debt overhang as they relate to both debtor and creditor countries. In particular, we assess the impact of monetary policy on financial stability and how it can be used to smooth borrowers, as well as creditors, consumption over the...

This paper models the role of the lender of last resort (LoLR) in a general equilibrium framework. We allow for heterogeneous agents and a risk-averse banking sector, and incorporate the frictions of endogenous default, liquidity, and money. Adverse supply shocks in monetary endowments trigger...

This book addresses the interaction of monetary and regulatory policy to achieve the important goal of price and financial stability. The authors show how financial stability can be assessed and measured continuously, and discuss the interrelationships between liquidity and default. Without...

This paper provides a quantitative metric for financial stability of Korean commercial banking system based on the Tsomocos (J Math Econ 39(5–6):619–655, <CitationRef CitationID="CR32">2003</CitationRef>) model, for which we use market data as proxies for probabilities of default and equity valuation of the banking sector. We estimate...</citationref>

Mainstream macro-models have assumed away financial frictions, in particular default. The minimum addition in order to introduce financial intermediaries, money and liquidity into such models is the possibility of default. This, in turn, requires that institutions and price formation mechanisms...

The Basel Committee on Banking Supervision is proposing to introduce, in 2006, new risk-based requirements for internationally active (and other significant) banks. These will replace the relatively risk-invariant requirements in the current Accord. The new requirements for the largest bank will...