A. The Nature of the Study This study attempts to assess the impact that restrictions on legal rate ceilings and restrictions on creditors’ abilities to collect on delinquent or defaulted debts (i.e., "creditors’ remedies") have on the consumer credit markets. The methodology employed is to study intensively the behavior of creditors in selected local consumer credit markets. The consumer credi...

Consumer debt and bankruptcy are central issues today because of their explosive trends over the last 20 years in the U.S. economy. However, there is no convincing explanation for these facts. A drop in information costs, a potential cause, has not been evaluated mainly because there is no quantitative theory of consumer debt and bankruptcy where the cost of information plays an important role....

n 1998, the federal government of the United States reached a budget surplus for the first time in 30 years. Even though many commentators have described this event as a rare and major success, what is remarkable is not that the U.S. government has reached a surplus, but that this result is perceived as so "exceptional." In fact, given the strong expansion of the U.S. economy in the last eight ...

We develop a lending game in which relationship-specific investments by firms benefit banks and vice versa. We show that even if all firms and banks prefer high-tech relationship loans under the first-best, asymmetric information and investment non-contractibility make them choose low-tech transaction loans. However, governments with intermediate risk ratings can use Groves subsidies for a conc...

With the change in donors’ priorities since the end of the Cold War in the late 1980s, there has been a decline in annual aid inflows to Pacific island countries (PICs), which have been among the world’s top recipients of aid per capita in the past. Along with fall in aid inflows, growing annual domestic budgetary deficits in recent years have forced some PICs to finance them through borrowing....

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...

Problem statement: The problem of budget deficits and current account imbalances has attracted serious consideration from academics and policy-makers in both developed and developing countries. The question is whether such relationships between budget deficits and current account deficits exist in the case of Philippines. Approach: The purpose of this study was to test the validity of the Keyne...

a r t i c l e i n f o a b s t r a c t We theorize and confirm a new channel by means of which liquidity costs are embedded in CDS spreads. We show that credit default swap (CDS) spreads are directly related to equity market liquidity in the Merton [Merton, R.C., 1974. On the pricing of corporate debt: The risk structure of interest rates. J. Finance 29, 449–470] model via hedging. We confirm th...

While much attention has been focused on the optimal ratio of a firm’s debt to equity, the “optimal” or best balance between bond financing and (longer-term) bank financing has scarcely been addressed. This essay examines the principal differences between an economy with a well-developed corporate bond market free from government interference and an economy in which bank financing plays a centr...

The views and opinions expressed in this volume are those of the authors and do not necessarily represent the views of Unesco or of the IEP. The designations employed and the presentation of material throughout this report do not imply the expression of any opinion whatsoever on the part of Unesco or IIEP concerning the legal status of any country, territory, city or area or its authorities, or...