Artículo de revista
The impossibility of effective enforcement mechanisms in collateralized credit markets
Fecha
2010Registro en:
Journal of Mathematical Economics 46 (2010) 332–342
doi:10.1016/j.jmateco.2009.12.004
Autor
Ferreira, Thiago Revil T.
Torres Martínez, Juan Pablo
Institución
Resumen
We analyze the possibility of the simultaneous presence of two key features in price-taking
sequential economies: collateralized credit operations and effective additional enforcement
mechanisms, i.e. those implying payments besides the value of collateral guarantees.
We show that these additional mechanisms, instead of strengthening, actually weaken
the restrictions that collateral places on borrowing. In fact, when collateral requirements
are not large enough in relation to the effectiveness of the additional mechanisms, lenders
anticipate payments exceeding the value of the collateral requirements. Thus, by nonarbitrage,
they lend more than the value of these guarantees. In turn, in the absence of
other market frictions such as borrowing constraints, agents may indefinitely postpone the
payment of their debts, implying the collapse of the agent’s maximization problem and of
such credit markets.