SCREENING AS A UNIFIED THEORY OF DELINQUENCY, RENEGOTIATION, AND BANKRUPTCY

• 成果类型: Article
• 署名作者: Kovrijnykh, Natalia; Livshits, Igor
• 署名单位: Arizona State University; Arizona State University-Tempe; Western University (University of Western Ontario)
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12225
• 发表日期: 2017
• 页码: 499-527
• 关键词: default; RISK; foreclosure; MODEL

摘要

We propose a parsimonious model with adverse selection where delinquency, renegotiation, and bankruptcy all occur in equilibrium as a result of a simple screening mechanism. A borrower has private information about her endowment, and a lender uses random contracts to screen different types of borrowers. In equilibrium, some borrowers choose not to repay and thus become delinquent. The lender renegotiates with some delinquent borrowers. In the absence of renegotiation, delinquency leads to bankruptcy. Applied to mortgage restructuring, our mechanism generates amplification of house-price shocks through foreclosure spillovers. We also show that government intervention aimed at limiting foreclosures may have unintended consequences.