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Bloise, Gaetano, Polemarchakis, H. M. and Vailakis, Yiannis (2018) Sustainable debt. Working Paper. Coventry, UK: University of Warwick. Department of Economics. Warwick economics research papers series (WERPS) (1178). (Unpublished)
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Official URL: https://warwick.ac.uk/fac/soc/economics/research/w...
Abstract
Debt is sustainable at a competitive equilibrium due solely to the reputation of debtors for repayment; that is, even absent collateral or legal sanctions available to creditors. Under incomplete markets, when the rate of interest (net of growth) is recurrently negative, self-insurance is more costly than borrowing, and repayments on loans are enforced by the implicit threat of loss of risk-sharing advantages of debt contracts. Private debt credibly circulates as a form of inside money and, in general, is not valued as a speculative bubble; it is distinct from outside money. Competitive equilibria with self-enforcing debt exist under a suitable hypothesis of gains from trade.
Item Type: | Working or Discussion Paper (Working Paper) | |||||||||||||||
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Subjects: | H Social Sciences > HB Economic Theory | |||||||||||||||
Divisions: | Faculty of Social Sciences > Economics | |||||||||||||||
Library of Congress Subject Headings (LCSH): | Interest rates, Equilibrium (Economics), Sustainable development | |||||||||||||||
Series Name: | Warwick economics research papers series (WERPS) | |||||||||||||||
Publisher: | University of Warwick. Department of Economics | |||||||||||||||
Place of Publication: | Coventry, UK | |||||||||||||||
ISSN: | 0083-7350 | |||||||||||||||
Official Date: | October 2018 | |||||||||||||||
Dates: |
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Number: | 1178 | |||||||||||||||
Institution: | University of Warwick | |||||||||||||||
Status: | Not Peer Reviewed | |||||||||||||||
Publication Status: | Unpublished | |||||||||||||||
Access rights to Published version: | Open Access (Creative Commons) | |||||||||||||||
Description: | This paper also appears as CRETA Discussion paper 45 |
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RIOXX Funder/Project Grant: |
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