Related papers: Borrowing Constraints in Emerging Markets
We investigate a multi-household DSGE model in which past aggregate consumption impacts the confidence, and therefore consumption propensity, of individual households. We find that such a minimal setup is extremely rich, and leads to a…
Using a Taylor rule amended with official reserves movements, we derive country-specific monetary shocks and employ a local projections-estimator for tracking gender-disaggregated labor-market responses in 99 developing economies from 2009…
Consider the problem of a government that wants to reduce the debt-to-GDP (gross domestic product) ratio of a country. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the…
Loan seasoning and inefficient consumer interest rate refinance behavior are well-known for mortgages. Consumer automobile loans, which are collateralized loans on a rapidly depreciating asset, have attracted less attention, however. We…
Understanding how credit flows through inter-firm networks is critical for assessing financial stability and systemic risk. In this study, we introduce DebtStreamness, a novel metric inspired by trophic levels in ecological food webs, to…
Microfinance, despite its significant potential for poverty reduction, is facing sustainability hardships due to high default rates. Although many methods in regular finance can estimate credit scores and default probabilities, these…
We introduce the entropic measure transform (EMT) problem for a general process and prove the existence of a unique optimal measure characterizing the solution. The density process of the optimal measure is characterized using a…
This paper investigates how dispersion in banks' subjective inflation forecasts is a channel of the transmission of monetary policy to credit supply. We extend the Monti-Klein model of monopolistic banking by incorporating risk aversion,…
Sovereign loan portfolios of Multilateral Development Banks (MDBs) typically consist of only a small number of borrowers and hence are heavily exposed to single name concentration risk. Based on realistic MDB portfolios constructed from…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
We use principle component analysis (PCA) of cross correlations in European government bonds and European stocks to investigate the systemic risk contained in the European economy. We tackle the task to visualize the evolution of risk,…
Inspired by recent ideas on how the analysis of complex financial risks can benefit from analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk---a major obstacle to the…
Mortgage default rates, on the one hand, serve as a measure of economic health to support decision-making by insurance companies, and on the other hand, is a key risk factor in the asset-liability management (ALM) practice, as mortgage…
Previous studies show that natural disasters decelerate economic growth, and more so in countries with lower financial development. We confirm these results with more recent data. We are the first to show that fiscal stability reduces the…
Frontier LLMs are optimised around high-resource assumptions about language, knowledge, devices, and connectivity. Whilst widely accessible, they often misfit conditions in the Global South. As a result, users must often perform additional…
Market power behaviour often occurs in modern wholesale electricity markets. Mixed Complementarity Problems (MCPs) have been typically used for computational modelling of market power when it is characterised by an oligopoly with…
Securities borrowing and lending are critical to proper functioning of securities markets. To alleviate securities owners' exposure to borrower default risk, overcollateralization and indemnification are provided by the borrower and the…
This paper explores a mechanism for mitigating sovereign risk in emerging markets without risks mutualization. The mechanism involves pooling diversified portfolios of sovereign bonds and issuing them in tranches, with the senior tranche…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
I sketch a program for a microeconomic theory of the main component of the business cycle as a recurring disequilibrium, driven by incompleteness of the financial market and by information asymmetries between borrowers and lenders. This…