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Events of Department of Economics

October 8, 2020 at 12:30 - 13:45
Seminar Room 5.e4.sr04 - Via Roentgen 1

Seminar (Joint with the BAFFI CAREFIN)


Consumer Bankruptcy as Aggregate Demand Management

Kurt Mitman (Stockholm University)


Registration is required to attend the On Campus Brown Bag event, which is restricted to Bocconi Faculty, Students and Researchers. All other interested parties are invited to participate via Live Streaming, please contact to receive the link

Abstract: We study the role of consumer default policy in macroeconomic stabilization. Our economy features nominal rigidities, incomplete financial markets and heterogeneous households with access to unsecured defaultable debt. In addition to its traditional role of balancing of the ex-ante cost of credit against the ex-post benefit to defaulters, the optimal bankruptcy code features an aggregate demand management objective. We study quantitatively the extent of business cycle amplification under different degrees of leniency of the bankruptcy code. We also revisit the optimal degree of bankruptcy leniency.