Debt deflation worries: a restatement

Debt Deflation and Bank Recapitalization

During some recent financial crises, the majority of domestic banks or indeed the entire banking sector became insolvent. We have analyzed the welfare effects of policy responses to bank insolvency by examining a modified version of the Diamond-Rajan model, introducing a fiat currency. The sources of inefficiency in our model are the ”moral hazard in banking” and the “premature liquidation of b...

Comment on Debt Deflation: Theory and Evidence

Lessons from the Debt - Deflation Theory of Sudden Stops

The " Sudden Stop " phenomenon of the recurrent emerging markets crises of the last ten years is one of the key questions facing International Macroeconomics. Sudden Stops are defined by unusually large recessions marked by: sharp, abrupt current account reversals, large contractions in output and absorption, and collapses in goods and asset prices. In Mexico's 1995 Sudden Stop, for example, th...

Quantitative implications of a debt-deflation theory of Sudden Stops and asset prices

This paper shows that the quantitative predictions of an equilibrium asset-pricing model with financial frictions are consistent with key features of the Sudden Stop phenomenon. Foreign traders incur costs in trading assets with domestic agents, and a collateral constraint limits external debt to a fraction of the market value of domestic equity holdings. When this constraint does not bind, sta...

Island worries

additional risk, he says, comes from the very property that regenerative medicine wants replacement organs to possess, namely invisibility to the immune system. " Tissues derived from iPSC may share with ES cells the potential to display immune privilege which may provide a 'safe haven' in which rare transformed cells may develop into tumours or viral pathogens may flourish under the radar of t...