The DOI matches its Crossref record; 22 of the 22 references it cites were found in a registry or an index.
A Quantitative Theory of Unsecured Consumer Credit with Risk of Default
Abstract
We study, theoretically and quantitatively, the general equilibrium of an economy in which households smooth consumption by means of both a riskless asset and unsecured loans with the option to default. The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Competitive financial intermediaries offer a menu of loan sizes and interest rates wherein each loan makes zero profits. We prove the existence of a steady-state equilibrium and characterize the circumstances under which a household defaults on its loans. We show that our model accounts for the main statistics regarding bankruptcy and unsecured credit while matching key macroeconomic aggregates, and the earnings and wealth distributions. We use this model to address the implications of a recent policy change that introduces a form of “means testing” for households contemplating a Chapter 7 bankruptcy filing. We find that this policy change yields large welfare gains.
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Cites
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Uninsured Idiosyncratic Risk and Aggregate Saving
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Cited by
Inequality, Leverage, and Crises
Kumhof, M., Rancière, R., & Winant, P. (2015) · American Economic Review · doi:10.1257/aer.20110683 · Cited by 664
Default and the Maturity Structure in Sovereign Bonds
Arellano, C., & Ramanarayanan, A. (2012) · Journal of Political Economy · doi:10.1086/666589 · Cited by 428
The nature of credit constraints and human capital
Lochner, L. J., & Monge-Naranjo, A. (2011) · American Economic Review · doi:10.1257/aer.101.6.2487 · Cited by 347
Metadata
- Authors
- Chatterjee, S., Corbae, D., Nakajima, M., & Ríos-Rull, J.-V.
- Venue
- Econometrica
- Publisher
- The Econometric Society
- Published
- 2007-11
- Volume
- 75
- Issue
- 6
- Pages
- 1525-1589
- ISSN
- 0012-9682 (ISSN-L)
- 1468-0262
- OpenAlex
- W3123591829
- Cited by
- 572
- References
- 22
- FWCI
- 80.78
- Type
- journal article
- Language
- en
- Open access
- closed
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