2005 Deviatov, Alexei; Ickes, Barry. Reputation and the Soft-Budget Constraint./ Working Paper # - Moscow, New Economic … School, 2005. – 46 p. (Eng.) We study the role of reputation in dealing with the soft-budget constraint. We examine … constraint syndrome. A soft budget constraint arises when borrowers know (or expect) that they will be bailed out in the face of …

expected lifetime utility that would result if the current budget constraint were relaxed by one unit. If λ t is greater than … zero, making the current budget constraint binding, then the end-of-period financial assets must be equal to zero. The …+ρ ) ' 1 γ (r−ρ). (11) Eq(6) includes the budget constraint, e.g., the disposable income constraint. In addition, we need …

carried over from the previous period. The households’ budget constraint reads Mt +Bt +Ptct • Rt¡1Bt¡1 +Mt¡1 +Ptwtlt ¡Pt¿t; (1 … the budget constraint (1) holding with equality and by the transversality condition limt!1(mt + bt)Qti=1 …i=Ri¡1 = 0 …

and decide on borrowing, in a model where the banking system faces a soft budget constraint. In contrast with recent …