Paluszynski, Radoslaw; Stefanidis, Georgios - In: Quantitative economics : QE ; journal of the … 14 (2023) 1, pp. 277-308
Quantitative models of sovereign default predict that governments reduce borrowing during recessions to avoid debt … low. We propose that governments borrow into debt crises because of frictions in the adjustment of their expenditures. We …, the government borrows to smooth out the reduction in public employment, which results in increasing debt and higher …