Midlands State University Library
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Savings and default by M. Udara Peiris and Alexandros P. Vardoulakis

By: Contributor(s): Material type: TextTextSeries: ; Volume 54, number 1Heildelberg : Springer, 2013Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
Subject(s): LOC classification:
  • HB119 ECO
Online resources: Summary: In the presence of uninsurable idiosyncratic risk, the optimal credit contract allows for the possibility of default. In addition, the optimal contract incorporates a precautionary savings motive over and above what agents would otherwise save. When default is sufficiently high, credit markets may collapse. A regulatory requirement on the level of savings can increase risk sharing and improve welfare by increasing the gains to trade in credit exchange. Under the appropriate verifiability condition on the level of savings, an appropriate market structure, agents voluntarily increase their level of storage such that trade and welfare improve.
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Holdings
Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HB119 ECO (Browse shelf(Opens below)) vol. 54, no. 1 (pages 153-180) SP21036 Not for loan For In house Use

In the presence of uninsurable idiosyncratic risk, the optimal credit contract allows for the possibility of default. In addition, the optimal contract incorporates a precautionary savings motive over and above what agents would otherwise save. When default is sufficiently high, credit markets may collapse. A regulatory requirement on the level of savings can increase risk sharing and improve welfare by increasing the gains to trade in credit exchange. Under the appropriate verifiability condition on the level of savings, an appropriate market structure, agents voluntarily increase their level of storage such that trade and welfare improve.

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