IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Money, Credit and Default

Listed author(s):
  • Sandra Lizarazo

    ()

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

  • Jose Maria Da-Rocha

    ()

    (Facultade de Ciencias Económicas e Empresariais, Universidade de Vigo)

This paper develops a quantitative model of unsecured debt, default, and money demand for heterogenous agents economies. The paper generates a theory of money demand for the case in which money is a dominate asset that is not needed to carry-out transactions. In this environment holding money helps the agents to smooth their consumption during those periods in which they are excluded from credit markets following a default in their debts. In the model the welfare of the individuals is affected by the inflation rate: high inflation rates preclude individuals of using money as an asset that helps them smooth their consumption profile but low inflation rates tend to make softer the punishment for default making it diffcult to sustain high levels of debt at equilibrium. This two opposite effects imply that in equilibrium the inflation rate that maximizes individuals welfare is positive but not too high.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.itam.mx/pub/academico/inves/lizarazo/09-08.pdf
Download Restriction: no

Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0908.

as
in new window

Length: 12 pages
Date of creation: 2009
Handle: RePEc:cie:wpaper:0908
Contact details of provider: Postal:
Camino a Sta. Teresa 930, Mexico, D.F. 10700

Phone: +525 628 4197
Fax: +525 628 4058
Web page: http://cie.itam.mx/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Aguiar, Mark & Gopinath, Gita, 2006. "Defaultable debt, interest rates and the current account," Journal of International Economics, Elsevier, vol. 69(1), pages 64-83, June.
  2. Cuadra, Gabriel & Sapriza, Horacio, 2008. "Sovereign default, interest rates and political uncertainty in emerging markets," Journal of International Economics, Elsevier, vol. 76(1), pages 78-88, September.
  3. Gelos, R. Gaston & Sahay, Ratna & Sandleris, Guido, 2011. "Sovereign borrowing by developing countries: What determines market access?," Journal of International Economics, Elsevier, vol. 83(2), pages 243-254, March.
  4. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
  5. Kaminsky, Graciela & Lyons, Richard & Schmukler, Sergio, 2001. "Mutual fund investment in emerging markets - an overview," Policy Research Working Paper Series 2529, The World Bank.
  6. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  7. Bernhard Paasche & Stanley E. Zin, 2001. "Competition and Intervention in Sovereign Debt Markets," NBER Working Papers 8679, National Bureau of Economic Research, Inc.
  8. Kaminsky, Graciela L & Reinhart, Carmen M, 1998. "Financial Crises in Asia and Latin America: Then and Now," American Economic Review, American Economic Association, vol. 88(2), pages 444-448, May.
  9. Carmen M. Reinhart, 2002. "Default, Currency Crises, and Sovereign Credit Ratings," World Bank Economic Review, World Bank Group, vol. 16(2), pages 151-170, August.
  10. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & José-Víctor Ríos-Rull, 2007. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Econometrica, Econometric Society, vol. 75(6), pages 1525-1589, November.
  11. Uribe, Martin & Yue, Vivian Z., 2006. "Country spreads and emerging countries: Who drives whom?," Journal of International Economics, Elsevier, vol. 69(1), pages 6-36, June.
  12. Fernando A. Broner & Guido Lorenzoni & Sergio L. Schmukler, 2013. "Why Do Emerging Economies Borrow Short Term?," Journal of the European Economic Association, European Economic Association, vol. 11, pages 67-100, 01.
  13. Hernandez, Leonardo F. & Valdes, Rodrigo O., 2001. "What drives contagion: Trade, neighborhood, or financial links?," International Review of Financial Analysis, Elsevier, vol. 10(3), pages 203-218.
  14. Neumeyer, Pablo A. & Perri, Fabrizio, 2005. "Business cycles in emerging economies: the role of interest rates," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 345-380, March.
  15. Brian D. Wright & Kenneth M. Kletzer, 2000. "Sovereign Debt as Intertemporal Barter," American Economic Review, American Economic Association, vol. 90(3), pages 621-639, June.
  16. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
  17. Taimur Baig & Ilan Goldfajn, 2000. "The Russian default and the contagion to Brazil," Textos para discussão 420, Department of Economics PUC-Rio (Brazil).
  18. Bekaert, G. & Harvey, C. R. & Lumsdaine, R. L., 2002. "The dynamics of emerging market equity flows," Journal of International Money and Finance, Elsevier, vol. 21(3), pages 295-350, June.
  19. Cristina Arellano, 2008. "Default Risk and Income Fluctuations in Emerging Economies," American Economic Review, American Economic Association, vol. 98(3), pages 690-712, June.
  20. Guillermo A. Calvo & Eduardo Fernández-Arias & Ernesto Talvi & Carmen M. Reinhart, 2001. "The Growth-Interest Rate Cycle in the United States and its Consequences for Emerging Markets," IDB Publications (Working Papers) 6491, Inter-American Development Bank.
  21. Juan Carlos Hatchondo & Leonardo Martinez & Horacio Sapriza, 2009. "Heterogeneous Borrowers In Quantitative Models Of Sovereign Default," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1129-1151, November.
  22. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Sources of contagion: is it finance or trade?," Journal of International Economics, Elsevier, vol. 54(2), pages 293-308, August.
  23. Linda S. Goldberg, 2007. "The International Exposure of U.S. Banks: Europe and Latin America Compared," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 203-240 National Bureau of Economic Research, Inc.
  24. Richard Cantor & Frank Packer, 1995. "Sovereign credit ratings," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 1(Jun).
  25. Rodrigo O. Valdes & Leonardo Hernández & Pamela Melado, 2001. "Determinants of Private Capital Flows in the 1970's and 1990's; Is there Evidence of Contagion?," IMF Working Papers 01/64, .
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cie:wpaper:0908. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diego Dominguez)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.