Coordinated strategic defaults and financial fragility in a costly state verification model ¬リニ
نویسندگان
چکیده
Diversification through a financial intermediary has the benefit of transforming loans that need costly monitoring into bank deposits that do not. We show that financial intermediation in a costly state verification model has a cost not yet analyzed: it allows for the existence of multiple equilibria, some of which are characterized by borrowers defaulting on their loans because they expect other borrowers to do the same (i.e. bad equilibria arise due to strategic complementarities in entrepreneurs’ actions). We propose two mechanisms that fully implement the desired equilibrium allocation. 2013 Elsevier Inc. All rights reserved.
منابع مشابه
Macroeconomic Fluctuations and Corporate Financial Fragility
Using a large sample of accounting data for non nancial companies in France on the period 1990-2004, the paper studies the interactions between macroeconomic shocks and companies nancial fragility. We consider links in both directions, namely whether rmsbankruptcies are a¤ected by macroeconomic variables, and whether bankruptcies determine the business cycle. We estimate forecasting equatio...
متن کاملPrice dynamics, financial fragility and aggregate volatility ¬リニ
Within a general equilibrium framework à la (Long and Plosser, 1983), we investigate the dynamics emerging from the interactions of households and firms that are adaptive price setters and financially constrained. Adaptive price-setting behavior induces microfounded out-of-equilibrium dynamics along which agents become heterogeneous in terms of prices and wealth. The stringency of the financial...
متن کاملBanking fragility in Colombia: An empirical analysis based on balance sheets ¬リニ
In this paper, we study the empirical relationship between credit funding sources and the financial vulnerability of the Colombian banking system. We propose a statistical model to measure and predict banking fragility episodes associated with credit funding sources classified into retail deposits and wholesale funds. We compute the probability of financial fragility for both the aggregated ban...
متن کاملFiscal deficits, financial fragility, and the effectiveness of government policies ¬リニ
Recent macro developments in the euro area have highlighted the interactions between fiscal policy, sovereign debt, and financial fragility. We take a structural macroeconomic model with frictions in the financial intermediation process, in line with recent research, but introduce asset choice and sovereign debt holdings in the portfolio of banks. Using this model, we emphasize a new crowding-o...
متن کاملFragility Curves for Reinforced Concrete Frames with Lap-Spliced Columns
Placing column lap-splice in the locations of possible nonlinear deformation may adversely affect the structures response to strong ground motions. Localization of damage in splice zone may change the structural response and prevent the load redistribution and development of a uniform pattern of nonlinear excursions among the various members. Validated by existing laboratory experiments, this s...
متن کامل