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Working Paper
Maturity, indebtedness, and default risk
Eyigungor, Burcu; Chatterjee, Satyajit (2009)
We present a novel and tractable model of long-term sovereign debt. We make two sets of contributions. First, on the substantive side, using Argentina as a test case we show that unlike one-period debt models, our model of long-term sovereign debt is capable of accounting for the average spread, the average default frequency, and the average debt-to-output ratio of Argentina over the 1991-2001 period without any deterioration in the model's ability to account for Argentina's cyclical facts. Using our calibrated model we determine what Argentina's debt, default frequency and welfare would have ...
Working Papers , Paper 09-2

Working Paper
Defaultable debt, interest rates, and the current account
Aguiar, Mark; Gopinath, Gita (2004)
World capital markets have experienced large-scale sovereign defaults on a number of occasions, the most recent being Argentina?s default in 2002. In this paper, we develop a quantitative model of debt and default in a small open economy. We use this model to match four empirical regularities regarding emerging markets: defaults occur in equilibrium, interest rates are countercyclical, net exports are countercyclical, and interest rates and the current account are positively correlated. That is, emerging markets on average borrow more in good times and at lower interest rates than in slumps. ...
Working Papers , Paper 04-5

Journal Article
How should banks account for loan losses?
Benston, George J.; Wall, Larry D. (2005-10)
The agencies that regulate banks are involved in an ongoing debate about the appropriate way for banks and other lenders to account for default risk on loans. Accounting authorities are concerned with whether the accounting method meets the needs of general-purpose users of financial statements, particularly investors. In contrast, bank supervisors are concerned about banks being inadequately capitalized and possibly failing. ; To shed light on this debate, this article reviews the generally accepted accounting principles (GAAP) currently used, which are based on historic-cost values for ...
Economic Review , Volume 90 , Issue Q4 , Pages 19-38

Journal Article
Quantitative models of sovereign default and the threat of financial exclusion
Sapriza, Horacio; Martinez, Leonardo; Hatchondo, Juan Carlos (2007-07)
Economic Quarterly , Volume 93 , Issue Sum , Pages 251-286

Discussion Paper
Payment size, negative equity, and mortgage default
Fuster, Andreas; Willen, Paul S. (2012)
Surprisingly little is known about the importance of mortgage payment size for default, as efforts to measure the treatment effect of rate increases or loan modifications are confounded by borrower selection. We study a sample of hybrid adjustable-rate mortgages that have experienced large rate reductions over the past years and are largely immune to these selection concerns. We show that interest rate changes dramatically affect repayment behavior. Our estimates imply that cutting a borrower?s payment in half reduces his hazard of becoming delinquent by about two-thirds, an effect that is ...
Public Policy Discussion Paper , Paper 12-10

Report
The financial crisis at the kitchen table: trends in household debt and credit
Van der Klaauw, Wilbert; Lee, Donghoon; Brown, Meta; Haughwout, Andrew F. (2010)
The Federal Reserve Bank of New York (FRBNY) Consumer Credit Panel, created from a sample of U.S. consumer credit reports, is an ongoing panel of quarterly data on individual and household debt. The panel shows a substantial run-up in total consumer indebtedness between the first quarter of 1999 and the peak in the third quarter of 2008, followed by a steady decline through the third quarter of 2010. During the same period, delinquencies rose sharply: Delinquent balances peaked at the close of 2009 and then began to decline again. This paper documents these trends and discusses their sources. ...
Staff Reports , Paper 480

Journal Article
Europe may provide lessons on preventing mortgage defaults
Sanchez, Juan M.; Martinez, Leonardo; Hatchondo, Juan Carlos (2013-07)
During the last global recession, house prices fell in some European countries almost as much as in some U.S. states. However, mortgage defaults occurred at a much lower rate in Europe. The authors say the difference might be explained by two regulations that apply in Europe but are used on a limited or much less restrictive basis in the U.S.
The Regional Economist , Issue July

Working Paper
Defaultable Debt, Interest Rates, and the Current Account
Gopinath, Gita; Aguiar, Mark (2004-05-01)
World capital markets have experienced large-scale sovereign defaults on a number of occasions, the most recent being Argentina’s default in 2002. In this paper we develop a quantitative model of debt and default in a small open economy. We use this model to match four empirical regularities regarding emerging markets: defaults occur in equilibrium, interest rates are countercyclical, net exports are countercyclical, and interest rates and the current account are positively correlated. That is, emerging markets on average borrow more in good times and at lower interest rates than they do in ...
Working Paper Series , Paper 2004-31

Working Paper
Mortgage defaults
Sanchez, Juan M.; Martinez, Leonardo; Hatchondo, Juan Carlos (2011)
We incorporate house price risk and mortgages into a standard incomplete market (SIM) model. We calibrate the model to match U.S. data, and we show that the model also accounts for non-targeted features of the data such as the distribution of down payments, the life-cycle prole of homeownership, and the mortgage default rate. In addition, we show that the average coefficients that measure the agents' ability to self-insure against income shocks are similar to those of a SIM model without housing (as presented by Kaplan and Violante, 2010). However, incorporating housing increases the values ...
Working Paper , Paper 11-05

Journal Article
Argentina Agonistes
Dueker, Michael J. (2002-02)
International Economic Trends , Issue Feb

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