-term bonds subject to standard contracting frictions: the country cannot commit to repay its debts nor to a specific path of … inefficient repayments. We examine the effects of alternative restructuring regimes, which either write-down debt or extend its …

bonds. Our main finding is that when reduction of debt is optimal, the sovereign should remain passive in the long-term bond … market during the deleveraging process, retiring long-term bonds as they mature but never actively issuing or buying back … these bonds. The only active margin is the short-term bond market, which involves partial roll over of such debt. Any active …

This possibility of debt default provides the fiscal authority to issue public bonds strategically in an earlier period …We include a potential possibilities of the government bonds in our theoretical model. The public bonds, therefore …