We investigate the question of whether sophistication in risk management fosters banking stability. We compare a simple … default risk of entrepreneurs individually. Both banking systems compete for deposits, loans, and bank equity. While a … equity and finances more entrepreneurs. Expected repayments in a simple system are always higher and its default risk is …

assess and price the risk of default. In order to analyse default risk in the macroeconomy, a simple general equilibrium … model with banks and financial intermediation is constructed in which default-risk can be priced. It is shown how the credit … spread can be attributed largely to the risk of default and how excess loan creation may emerge due different attitudes to …

. Results are presented for the United States, Japan, and an aggregate called "Europe" consisting of eleven European economies …. The primary theme of the paper is that the differences between Europe and the United States have been substantially … exaggerated in recent work. Europe has neither greater nominal wage flexibility nor more rigid real wages than the United States …

I study the constrained efficient allocations of a simple model of risk sharing and capital flows across countries … assuming that each country cannot commit to fully repay its contract obligations. In the model, the degree of risk sharing and …

general equilibrium model with two production sectors, risk-averse households and financial intermediation by banks. Banks are …