Title of article
Capital flowsundermoralhazard
Author/Authors
Viktor Tsyrennikov، نويسنده ,
Issue Information
روزنامه با شماره پیاپی سال 2013
Pages
17
From page
92
To page
108
Abstract
I analyzeamodelwithmoralhazardandlimitedenforcementinasmallopeneconomy.
I findthatwhenstatecontingentcontractingisallowedaddingthemoralhazardfriction
improvesthemodel’spredictionsalongseveraldimensions.First,itjustifieswhynon-
contingentdebtisanoptimalwaytofinanceanemergingeconomy.Second,itexplains
thelimitedconsumptionrisk-sharingandhigh,volatileandcounter-cyclicalinterestrates.
Third,itgeneratesrealisticcrisis-likedynamicsinwhichcapitalinflowsarebroughtto
a haltandinterestratessky-rocket.Themodelalsohasastronginternalpropagation
mechanism.
Limitedenforcementfriction,aloneortogetherwithmoralhazard,hasnearlynoeffect
on themodel’sperformance.Ialsoconstructasimpleempiricaltesttodistinguishbetween
thetwofrictionsanditfavorsmoralhazardoverlimitedenforcementfriction
Journal title
Journal of Monetary Economics
Serial Year
2013
Journal title
Journal of Monetary Economics
Record number
846574
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