Monnet, Cyril; Quintin, Erwan (June 2018). Optimal Exclusion (Discussion Papers). Bern: Department of Economics
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In a canonical model of borrowing and lending, an exclusion technology that features full exclusion for a deterministic number of periods following default maximizes stationary equilibrium welfare. This exclusion policy maximizes the stationary volume of mutually beneficial lending transactions. It also maximizes the average welfare of the excluded. The optimal length of exclusion depends on fundamentals such as borrower patience and the direct cost of default. It also depends on incentives to default for strategic rather than exogenous reasons.
Item Type: |
Working Paper |
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Division/Institute: |
03 Faculty of Business, Economics and Social Sciences > Department of Economics |
UniBE Contributor: |
Monnet, Cyril |
Subjects: |
300 Social sciences, sociology & anthropology > 330 Economics |
Series: |
Discussion Papers |
Publisher: |
Department of Economics |
Language: |
English |
Submitter: |
Lars Tschannen |
Date Deposited: |
02 Sep 2020 12:08 |
Last Modified: |
05 Dec 2022 15:40 |
JEL Classification: |
D52, D82 |
BORIS DOI: |
10.7892/boris.145864 |
URI: |
https://boris.unibe.ch/id/eprint/145864 |
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