The Impact of Crisis-Period Interest Rate Declines on Distressed Borrowers

Published in Working Paper, 2022

Recommended citation: Working Paper. 2022. Citation /files/The Impact of Crisis-Period Interest Rate Declines on Distressed Borrowers.pdf

  • Revise and Resubmit, Review of Financial Studies
  • Key Highlight: Distressed borrowers treated with larger benchmark interest rate declines benefit from increased debt-renegotiation and lower debt-service payments. However, following debt-renegotiation, surviving treated borrowers re-enter and linger in serious delinquency. Findings suggest that while monetary policy may effect reductions in benchmark rates and spur debt-renegotiation, such interventions may not lead to longer-run curative outcomes.
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