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Endogenous debt constraints in collateralized economies with default penalties

dc.contributor.authorVailakis, Yiannis
dc.contributor.authorMartins-da-Rocha, Victor-Filipe
HAL ID: 10403
ORCID: 0000-0002-6244-2678
dc.date.accessioned2012-02-09T11:32:15Z
dc.date.available2012-02-09T11:32:15Z
dc.date.issued2012
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/8094
dc.language.isoenen
dc.subjectPonzi schemesen
dc.subjectCollateralen
dc.subjectDebtconstraintsen
dc.subjectDefaulten
dc.subjectLimited commitmenten
dc.subjectIncomplete marketsen
dc.subjectInfinite horizon economiesen
dc.subject.ddc332en
dc.titleEndogenous debt constraints in collateralized economies with default penaltiesen
dc.typeArticle accepté pour publication ou publié
dc.contributor.editoruniversityotherUniversity of Exeter Business School http://business-school.exeter.ac.uk/ University of Exeter Business School;Royaume-Uni
dc.description.abstractenThe objective of the paper is to propose endogenous debt constraints that rule out Ponzi schemes and ensure the existence of equilibria in a model with limited commitment and (possible) default. We appropriately modify the definition of finitely effective debt constraints, introduced by Levine and Zame (1996) (see also Levine and Zame (2002)), to encompass models with limited commitment, default penalties and collateral. Along this line, we introduce in the setting of Araujo et al. (2002), Kubler and Schmedders (2003) and Páscoa and Seghir (2009) the concept of actions with finite equivalent payoffs. We show that, independent of the level of default penalties, restricting plans to have finite equivalent payoffs rules out Ponzi schemes and guarantees the existence of an equilibrium that is compatible with the minimal ability to borrow and lend that we expect in our model. An interesting feature of our debt constraints is that they give rise to budget sets that coincide with the standard budget sets of economies having a collateral structure but no penalties (as defined in Araujo et al. (2002)). This illustrates the hidden relation between finitely effective debt constraints and collateral requirements.en
dc.relation.isversionofjnlnameJournal of Mathematical Economics
dc.relation.isversionofjnlvol48en
dc.relation.isversionofjnlissue1en
dc.relation.isversionofjnldate2012
dc.relation.isversionofjnlpages1-13en
dc.relation.isversionofdoihttp://dx.doi.org/10.1016/j.jmateco.2011.09.006en
dc.description.sponsorshipprivateouien
dc.relation.isversionofjnlpublisherElsevieren
dc.subject.ddclabelEconomie financièreen


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