EconPapers    
Economics at your fingertips  
 

A Theory of Payments-Chain Crises

Saki Bigio

No 30859, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper introduces an endogenous network of payments chains into a business cycle model. Agents order production in bilateral relations. Some payments are executed immediately. Other payments, chained payments, are delayed until other payments are executed. Because production starts only after orders are paid, chained payments induce production delays. In equilibrium, agents choose the amount of chained payments given interest rates and access to internal funds or credit lines. This choice determines the payments-chain network and aggregate total-factor productivity (TFP). The paper characterizes equilibrium dynamics and their innate inefficiencies. Agents internalize the direct costs of their payment delays, but do not internalize the costs induced onto others. This externality produces novel policy insights and rationalizes permanent reductions in TFP under excessive debt.

JEL-codes: E32 E42 G01 (search for similar items in EconPapers)
Date: 2023-01
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-pay
Note: EFG ME
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w30859.pdf (application/pdf)

Related works:
Working Paper: A Theory of Payments-Chain Crises (2023) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:30859

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30859

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).

 
Page updated 2024-12-10
Handle: RePEc:nbr:nberwo:30859