Jüßen, Falko; Schabert, Andreas - 2013
relies on distortionary taxation and decides between full debt repayment and costly default. It tends to overborrow due to … myopia, which induces default to be a relevant policy option and provides a rationale to constrain sovereign borrowing. We … close-to-default states. These bailouts can lead to an increase in the mean debt price and a lower default probability that …