Debt Limits and Credit Bubbles in General Equilibrium
Victor Filipe Martins da Rocha
- Fonction : Auteur
- PersonId : 10403
- IdHAL : victor-filipe-martins-da-rocha
- ORCID : 0000-0002-6244-2678
- IdRef : 094213097
Yiannis Vailakis
- Fonction : Auteur
- PersonId : 836479
- ORCID : 0000-0002-2404-2120
- IdRef : 236124412
Résumé
We provide a novel characterization of self-enforcing debt limits in a general equilibrium framework of risk sharing with limited commitment, where defaulters are subject to recourse (a fractional loss of current and future endowments) and exclusion from future credit. We show that debt limits are exactly equal to the present value of recourse plus a credit bubble component. We provide applications to models of sovereign debt, private collateralized debt, and domestic public debt. Implications include an original equivalence mapping among distinct institutional arrangements, thereby clarifying the relationship between different enforcement mechanisms and the connection between asset and credit bubbles.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Article dans une revue |
Titre |
en
Debt Limits and Credit Bubbles in General Equilibrium
|
Résumé |
en
We provide a novel characterization of self-enforcing debt limits in a general equilibrium framework of risk sharing with limited commitment, where defaulters are subject to recourse (a fractional loss of current and future endowments) and exclusion from future credit. We show that debt limits are exactly equal to the present value of recourse plus a credit bubble component. We provide applications to models of sovereign debt, private collateralized debt, and domestic public debt. Implications include an original equivalence mapping among distinct institutional arrangements, thereby clarifying the relationship between different enforcement mechanisms and the connection between asset and credit bubbles.
|
Auteur(s) |
Victor Filipe Martins da Rocha
1, 2
, Toan Phan
3
, Yiannis Vailakis
4
1
CEREMADE -
CEntre de REcherches en MAthématiques de la DEcision
( 60 )
- Place du Maréchal de Lattre de Tassigny 75775 - Paris Cedex 16
- France
2
EESP -
Sao Paulo School of Economics
( 409290 )
- Brésil
3
Federal Reserve Bank of Richmond
( 577833 )
- P.O. Box 27622
Richmond, VA 23261
United States
- États-Unis
4
Adam Smith Business School
( 409288 )
- Royaume-Uni
|
Langue du document |
Anglais
|
Nom de la revue |
|
Vulgarisation |
Non
|
Comité de lecture |
Oui
|
Audience |
Internationale
|
Date de publication |
2019-10-27
|
Date de publication électronique |
2019-10-27
|
URL éditeur |
https://ssrn.com/abstract=3463753
|
Domaine(s) |
|
Mots-clés (JEL) |
|
Financement |
|
Mots-clés |
en
Limited Commitment, General Equilibrium, Rational Credit Bubbles
|
DOI | 10.2139/ssrn.3463753 |
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