Debts on debts

This paper studies the impact of mortgages on consumer debt and on debt on durable goods. We first present a stylized model in which an outstanding debt, representing mortgages, affects positively consumer debt, and debt on durable goods. The model is empirically tested for the U.S. using PSID 2005 wave. Our results are striking. First, we find strong evidence supporting a positive association between mortgage loans and consumer debts, regardless of the measures used, the control variables used, and the methods used. Second, we find that the effects of mortgages on the debt on durable goods are in general smaller than the effects of mortgages on consumer debt. Third, our distributional analysis reveals that the effects monotonically decrease as the quantile increases. Finally, our results are also confirmed by the results using the U.K. data.Consumer expenditure, housing, credit, censored regressions

“Robbing Peter to Pay Paul”: Economic and Cultural Explanations for How Lower-Income Families Manage Debt

This article builds upon classic economic perspectives of financial behavior by applying the narrative identity perspective of cultural sociology to explain how lower-income families respond to indebtedness. Drawing on in-depth qualitative interviews with 194 lower-income household heads, we show that debt management strategies are influenced by a desire to promote a financially responsible, self-sufficient social identity. Families are reluctant to ask for assistance when faced with economic hardship because it undermines this identity. Because the need to pay on debts is less acute than the need to pay for regular monthly expenses like rent or groceries, debts receive a lower priority in the monthly budget and families typically juggle their debts in private rather than turning to social networks for assistance. In some cases, however, debts take on special meanings and are handled differently. Respondents prioritize debts when they perceive payment as affirming a self-sufficient or upwardly mobile identity, but they reject and ignore debts they view as unfair or unjust. Because the private coping strategies families employ trap them in costly cycles of indebtedness and hinder future mobility prospects, debt management strategies are consequential for long-term financial well-being

Odious Debt, Old and New: The Legal Intellectual History of an Idea

In a sense, all debts are odious; that is, to use dictionary definitions, hateful; disgusting; offensive. Yet insofar as international economic law today is concerned, only a certain few debts can be considered odious debts in order to contest and perhaps eventually to repudiate them. Here, Feinerman examines the concepts of odious debt and related international legal phenomena, in both historical and contemporary context, with a view of determining the role that denomination of certain debts as odious may play in the overall process of sovereign debt rescheduling

Wealth distribution in presence of debts. A Fokker--Planck description

We consider here a Fokker--Planck equation with variable coefficient of diffusion which appears in the modeling of the wealth distribution in a multi-agent society. At difference with previous studies, to describe a society in which agents can have debts, we allow the wealth variable to be negative. It is shown that, even starting with debts, if the initial mean wealth is assumed positive, the solution of the Fokker--Planck equation is such that debts are absorbed in time, and a unique equilibrium density located in the positive part of the real axis will be reached

Extend the debt as it is not deeply out-of-the-money

In this paper, we modify the extendible debts model proposed in Longstaff (1990) to help relieve the moral hazard problem induced in the original model. In Longstaff¡¦s model, extending the maturity of the defaulted debts gives the borrower an incentive to default even if the borrower is insolvent. In this paper, we argue that the debt should not be extended if it is defaulted severely. We have shown that the extendible debt valuation can be obtained by the compound option pricing besides the PDE approach. We also have derived the fair interest rate of the extendible debts in this paper.

Odious Debts or Odious Regimes

Odious regimes have always been there. That there is no silver-bullet solution that will prevent odious regimes from arising, or stymie them once they do, is evident from the plethora of responses employed by the international community once a regime\u27s odiousness becomes clear. Current odious debt doctrine dates back to a 1927 treatise by a wandering Russian academic named Alexander Sack. The Sack definition contemplates a debt-by-debt approach to questionable borrowing. If a loan is used to benefit the population--to build a highway or water-treatment plant, for instance--the obligation would be fully enforceable, no matter how pernicious the borrower regime. Here, Bolton and Skeel attempt to fill the vacuum: a regime is odious if it engages in either systematic suppression or systematic looting

Political Risk and Sovereign Debt Contracts

Default on sovereign debt is a form of political risk. Issuers and creditors have responded to this risk both by strengthening the terms in sovereign debt contracts that enable creditors to enforce their debts judicially and by creating terms that enable sovereigns to restructure their debts. These apparently contradictory approaches reflect attempts to solve an incomplete contracting problem in which debtors need to be forced to repay debts in good states of the world; debtors need to be granted partial relief from debt payments in bad states; debtors may attempt to exploit divisions among creditors in order to opportunistically reduce their debt burden; and debtors and creditors may attempt to externalize costs on the taxpayers of other countries. We support this argument with an empirical overview of the development of sovereign bond terms from 1960 to the present

Renegotiating the Odious Debt Doctrine

Following the United States\u27 invasion and subsequent occupation of Iraq,\u27 the US government argued that the successor government in Iraq was not responsible for Iraq\u27s Saddam-era debt under the purported doctrine of odious-regime debt. This purported doctrine apparently excused--by operation of law--all successor regimes from repaying debts that were incurred by oppressive predecessor regimes. Here, Cheng presents three-part response regarding the purported rule that oppressive debts of a predecessor government do not bind its successor

Government debt, money and economic activity

Debts, Public ; Money