Why is There Debt?

17 Pages Posted: 6 Nov 2012

Date Written: 1991

Abstract

Most loan repayment agreements are largely noncontingent, and yet standard economic theory predicts that they should be highly contingent. An explanation is offered that relies on imperfect information and collateral. The theory suggests that perhaps all debt contracts are implicitly collateralized.

Suggested Citation

Lacker, Jeffrey M., Why is There Debt? (1991). FRB Richmond Economic Review, vol. 77, no. 4, July/August 1991, pp. 3-19, Available at SSRN: https://ssrn.com/abstract=2126208

Jeffrey M. Lacker (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8279 (Phone)
804-697-8461 (Fax)

HOME PAGE: http://www.richmondfed.org

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