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| Author: | Kehoe, T. Levine, D. |
| Title: | Debt-constrained asset markets |
| Journal: | Review of Economic Studies
1993 : OCT, VOL. 60(4):205, p. 865-888 |
| Index terms: | DEBT MARKETS ASSETS |
| Language: | eng |
| Abstract: | The authors develop a theory of general equilibrium with endogenous debt limits in the form of individual rationality constraints similar to those in the dynamic consistency literature. If an agent defaults on a contract, he can be excluded from future contingent claims markets trading and can have his assets seized. He cannot be excluded from spot markets trading, however, and he has some private endowments that cannot be seized. All information is publicly held and common knowledge, agent cannot enter into a contract in which he would have an incentive to default in some state. |
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