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An evolutionary model of debt

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  • Burke, Mary
  • Prasad, Kislaya

Abstract

A reputational model of debt is examined from an evolutionary game perspective. The game is played between randomly matched opponents and we ask whether debt can be supported in the long run steady state when lenders are given the option of joining an information sharing coalition. The players are forward-looking, but otherwise not very sophisticated. The paper uses a mix of analytical and computational methods and we actually simulate such an economy and examine long run steady states. Conclusions are drawn about the nature of institutions that support debt.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 49 (2002)
Issue (Month): 7 (October)
Pages: 1407-1438

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Handle: RePEc:eee:moneco:v:49:y:2002:i:7:p:1407-1438

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Web page: http://www.elsevier.com/locate/inca/505566

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References

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  1. Kandori, Michihiro, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 63-80, January.
  2. DANIEL B. KLElN, 1992. "Promise Keeping In The Great Society: A Model Of Credit Information Sharing," Economics and Politics, Wiley Blackwell, vol. 4(2), pages 117-136, 07.
  3. Jeremy I. Bulow & Kenneth Rogoff, 1988. "Sovereign Debt: Is To Forgive To Forget?," NBER Working Papers 2623, National Bureau of Economic Research, Inc.
  4. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
  5. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  6. Cole, Harold L. & Kehoe, Patrick J., 1995. "The role of institutions in reputation models of sovereign debt," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 45-64, February.
  7. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  8. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
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Cited by:
  1. Thierry Vignolo, 2010. "Imitation and selective matching in reputational games," Journal of Evolutionary Economics, Springer, vol. 20(3), pages 395-412, June.

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