We build a business cycle model characterized by endogenous firms dynamics, where banks may prefer debt renegotiation, i.e. non-performing exposures, to outright borrowers default. find that renegotiations only do not have adverse effects in the event of financial crisis episodes, but large share is associated with sharp deterioration economic activity two cases. First, if there are congestion ...

The flow of resources across sectors to their best use, with concomitant entry and exit, is central the functioning welfare properties a market economy. Nevertheless, most industrial organization research, including applications competition policy, undertakes partial equilibrium analysis in single sector, often fixed number firms. This article examines policy simple, multi-sector, general model...