This article studies a version of Obstfeld's (Journal of International Economics 43 (1997), 61-77) "escape clause" model. The model is calibrated to produce three rational expectations equilibria. Two of these equilibria are E-stable and one is unstable. Dynamics are introduced by assuming that...

Abstract. This paper compares default rates on Islamic and Western mortgages. Islamic mortgages feature a ‘partnership’ arrangement between the bank and the borrower, which allows the borrower to recover the current market value of his accumulated equity upon default. By itself, this makes...