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Passive Creditors

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  • Schoors, Koen
  • Sonin, Konstantin

Abstract

Creditors are often passive because they are reluctant to show bad debts on their own balance sheets. We propose a simple general equilibrium model to study the externality effect of creditor passivity. The model yields rich insights into the phenomenon of creditor passivity, both in transition and developed market economies. Policy implications are deduced. The model also explains in what respect banks differ from enterprises and what this implies for policy. Commonly observed phenomena in the banking sector, such as deposit insurance, lender of last resort facilities, government coordination to work out bad loans and special bank closure provisions, are interpreted in our framework.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4821.

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Date of creation: Dec 2004
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Handle: RePEc:cpr:ceprdp:4821

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Keywords: arrears; bad loans; bank closure; bankruptcy; creditor passivity;

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Citations

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Cited by:
  1. Claeys, Sophie & Schoors, Koen, 2007. "Bank supervision Russian style: Evidence of conflicts between micro- and macroprudential concerns," Working Paper Series 205, Sveriges Riksbank (Central Bank of Sweden).
  2. Marcos Yamada Nakaguma & Siegfried Bender, 2004. "A Emenda Da Reeleição E A Lei De Responsabilidade Fiscal: Impactos Sobre Ciclos Políticos E Performance Fiscal Dos Estados (1986-2002)," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of G 025, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  3. Zakolyukina Anastasia, 2006. "Bankrtuptcy in Russia: External Management Performance," EERC Working Paper Series 06-09e, EERC Research Network, Russia and CIS.
  4. D. Van Den Poel, 2003. "Predicting Mail-Order Repeat Buying: Which Variables Matter?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 03/191, Ghent University, Faculty of Economics and Business Administration.
  5. S. CLAEYS & G. LANINE & K. SCHOORs, 2005. "Bank Supervision Russian Style: Rules vs Enforcement and Tacit Objectives," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 05/307, Ghent University, Faculty of Economics and Business Administration.
  6. Irina Slinko & Evgeny Yakovlev & Ekaterina Zhuravskaya, 2003. "Laws for Sale: Evidence from Russia," Working Papers w0031, Center for Economic and Financial Research (CEFIR).
  7. Alexeev, Michael & Kim, Sunghwan, 2008. "The Korean financial crisis and the soft budget constraint," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 178-193, October.
  8. Claeys, Sophie & Lanine, Gleb & Schoors, Koen, 2005. "Bank supervision Russian style: Rules versus enforcement and tacit objectives," BOFIT Discussion Papers 10/2005, Bank of Finland, Institute for Economies in Transition.

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