This paper studies the effects of systematic distress and sectoral distress in the context of default/bankruptcy prediction using a large sample of U.S. public company default data from 1991 to 2009. I construct measures to proxy for economy-wide systematic distress and sectoral distress based...

The relationship between personal and firm bankruptcy is intuitively understood but has not been previously studied. When a person files a bankruptcy petition they reduce their spending on goods and services sold by companies. Similarly, when a firm files for bankruptcy some employees lose their...

We investigate the propagation of contagion through banks' balance sheets in a two-country model. We simulate an increase in non-performing loans in one bank, and study the effects on other banks and the macro economy of each country. We show that credit crunches destabilize each economy in the...

Over the last several years, the United States has experienced a significant recession. During this downturn, the number of real estate foreclosures has risen drastically. Recent studies have demonstrated a reduction in property values due to neighboring foreclosures – known as the foreclosure...

We examine the contagion effect of residential foreclosures and find strong evidence of a social interactions influence on default decisions where the interaction is based on neighbors' behavior in a previous period. Using a unique spatially explicit parcel level data set documenting residential...

Building on previous works on business fluctuations, we model the propagation of financial distress in a network of regions, each populated by heterogeneous interacting firms and banks. In order to diversify risk, firm sell goods outside their own region and borrow from banks located there....