TY  - BOOK
AU  - Peiris,M.Udara
AU  - Vardoulakis,Alexandros P.
TI  - Savings and default
AV  - HB119 ECO 
PY  - 2013///
CY  - Heildelberg
PB  - Springer
KW  - Savings
N2  - 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
UR  - 10.1007/s00199-012-0722-2
ER  -