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The recent debt crises in Europe and the U.S. states feature similar sharp increases in spreads on government debt but also show important differences. In Europe, the crisis occurred at high government indebtedness levels and had spillovers to the private sector. In the United States, state...
Persistent link: https://www.econbiz.de/10012457212
We develop a multicountry model in which default in one country triggers default in other countries. Countries are linked to one another by borrowing from and renegotiating with common lenders with concave payoffs. A foreign default increases incentives to default at home because it makes new...
Persistent link: https://www.econbiz.de/10012459113
The incentives for domestic investment in debtor countries are influenced by the terms of their external obligations and by the system of taxation utilized to provide government revenue for debt payments. It is well known that existing debt contracts could be altered to improve the incentives...
Persistent link: https://www.econbiz.de/10012475906
In the data sovereign default is always partial and varies in its duration. Debt levels during default episodes initially increase and do not experience reductions upon resolution. This paper presents a theory of sovereign default that replicates these properties, which are absent in standard...
Persistent link: https://www.econbiz.de/10012480023
This paper proposes a tractable framework to analyze fiscal space and the dynamics of government debt, with a possibly binding zero lower bound (ZLB) constraint. Without the ZLB, a greater primary deficit unambiguously raises debt. However, debt need not explode: When R G - φ, where φ is the...
Persistent link: https://www.econbiz.de/10012814482