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Passive Creditors

Koen Schoors and Konstantin Sonin ()

No w0015, Working Papers from Center for Economic and Financial Research (CEFIR)

Abstract: Creditors are often passive because they are reluctant to show bad debts on their balance sheets. We propose a simple general equilibrium model to study the externality effect of creditor passivity. The model yields rich insights in the phenomenon of creditor passivity, both in transitional and developed market economies. Policy implications are deduced. The model also explains in what respect banks differ from enterprises and what this implies for policy. Commonly observed phenomena in the banking sector, such as deposit insurance, lender of last resort facilities, government coordination to work out bad loans and special bank closure provisions, are interpreted in our framework.

Keywords: creditor passivity; bankruptcy; arrears; bad loans; bank closure (search for similar items in EconPapers)
JEL-codes: G21 G28 G33 P5 (search for similar items in EconPapers)
Date: 2005-01
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Related works:
Journal Article: Passive Creditors (2005) Downloads
Working Paper: Passive Creditors (2005) Downloads
Working Paper: Passive Creditors (2004) Downloads
Working Paper: Passive Creditors (2003) Downloads
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