IDEAS home Printed from https://ideas.repec.org/a/aea/aejmic/v13y2021i4p101-34.html
   My bibliography  Save this article

Optimal Financial Exclusion

Author

Listed:
  • Cyril Monnet
  • Erwan Quintin

Abstract

We study efficient exclusion policies in a canonical credit model that features both exogenous and strategic default along the equilibrium path. Policies that maximize welfare in a stationary equilibrium implement exclusion for a finite and deterministic number of periods following default. Front-loading exclusion makes the mass of socially valuable transactions as high as it can be in steady state. Less intuitively, doing so also maximizes the average welfare of excluded agents in equilibrium conditional on the level of incentives provided by the threat of exclusion. We argue that these results are robust to a host of natural variations on our benchmark model.

Suggested Citation

  • Cyril Monnet & Erwan Quintin, 2021. "Optimal Financial Exclusion," American Economic Journal: Microeconomics, American Economic Association, vol. 13(4), pages 101-134, November.
    • Handle: RePEc:aea:aejmic:v:13:y:2021:i:4:p:101-34
    DOI: 10.1257/mic.20190005
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/mic.20190005
    Download Restriction: no
    File URL: https://doi.org/10.3886/E119700V2
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/mic.20190005.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/mic.20190005.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/mic.20190005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Krause, Andreas, 2022. "The optimal exclusion length of borrowers after default," Economics Letters, Elsevier, vol. 220(C).

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmic:v:13:y:2021:i:4:p:101-34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.