We examine monetary policy options for a small open economy where sovereign default might occur due to intertemporal … insolvency. Under interest rate policy and floating exchange rates the equilibrium is indetermined. Under a fixed exchange rate … the equilibrium is uniquely determined and independent of sovereign default. …

the presence of sovereign default beliefs a monetary policy, which aims to stabilize inflation through an active interest … result, which relies on endogenous changes in the default premium, is at odds with the results in an environment without … default risk, where an active monetarypolicy guarantees macroeconomic stability. The results are highly relevant for the …

associated with default risk, e.g. money supply. …

and government deficits. The financial intermediaries face the risk of a (partial) default of the government on its debt …, significantly increasing output losses and declines in investment after a financial crisis. We introduce sovereign default risk … between sovereign default risk and financial fragility emerges. A debt-financed recapitalisation of the financial …

This paper examines the pricing of public debt in a quantitative macroeconomic model with government default risk …. Default may occur due to a fiscal policy that does not preclude a Ponzi game. When a build-up of public debt makes this … outcome inevitable, households stop lending such that the government has to default. Interest rates on government bonds …

This paper examines equilibrium determination under different monetary policy regimes when the government might default … sovereign default can affect the return on public debt. If the central bank sets the interest rate in a conventional way, the …