Müller, Andreas; Storesletten, Kjetil; Zilibotti, Fabrizio - C.E.P.R. Discussion Papers - 2015
limited commitment. The government of a sovereign country which has fallen into a recession of an uncertain duration issues … recovery from the recession. We characterize the competitive equilibrium and compare it with the constrained efficient … allocation. The equilibrium features increasing debt, falling consumption, and a non-monotone reform effort during the recession …