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The optimal exclusion length of borrowers after default

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  • Krause, Andreas

Abstract

We determine the optimal exclusion from borrowing to avoid strategic default. The optimal length is smaller if borrowers are less risky, have higher returns, markets are more competitive, deposit rates are low, and the more patient market participants are.

Suggested Citation

  • Krause, Andreas, 2022. "The optimal exclusion length of borrowers after default," Economics Letters, Elsevier, vol. 220(C).
    • Handle: RePEc:eee:ecolet:v:220:y:2022:i:c:s016517652200355x
    DOI: 10.1016/j.econlet.2022.110881
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    References listed on IDEAS

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    3. Ronel Elul & Piero Gottardi, 2015. "Bankruptcy: Is It Enough to Forgive or Must We Also Forget?," American Economic Journal: Microeconomics, American Economic Association, vol. 7(4), pages 294-338, November.
    4. Cyril Monnet & Erwan Quintin, 2021. "Optimal Financial Exclusion," American Economic Journal: Microeconomics, American Economic Association, vol. 13(4), pages 101-134, November.
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    More about this item

    Keywords

    Strategic default; Financial exclusion; Imperfect information; Borrowing;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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