A Model of Lending Resumption after Default: Lessons from Capital Markets during the Nineteenth Century

Autor:	Juan Sole
Rok vydání:	2009
Předmět:	Finance Economics and Econometrics business.industry Interpretation (philosophy) Sovereign default Financial system Audit Investment (macroeconomics) Economics Default Non-performing loan business Private information retrieval Capital market
Zdroj:	Economica. 76:557-573
ISSN:	1468-0335 0013-0427
DOI:	10.1111/j.1468-0335.2008.00690.x
Popis:	This paper mines the experience of the nineteenth-century capital markets to propose an alternative interpretation of international defaults. The standard view - that sovereign default entails exclusion from markets - was often contradicted by reality: in some cases lending ceased, but in others it continued. This paper claims that lenders' responses to default stem from the additional knowledge about borrowers that is acquired during default episodes. Lending is modelled in a costly-state-verification environment where sovereigns have private information about their investment projects (good or bad). After default, lenders audit projects and interrupt lending only if the project is believed to be a 'bad' one.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::e6ec52884c6f1295ca054e51cd692b27 https://doi.org/10.1111/j.1468-0335.2008.00690.x Zobrazit plný text záznamu Plný text ve formátu PDF