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Persistent link: https://www.econbiz.de/10009423929
We analyze how concerns for model misspecification on the part of international lenders affect the desirability of issuing state-contingent debt instruments in a standard sovereign default model a la Eaton and Gersovitz (1981). We show that for the commonly used threshold state-contingent bond...
Persistent link: https://www.econbiz.de/10012518920
We study gains from introducing a common numerical fiscal rule in a "Union" of model economies facing sovereign default risk. We show that among economies in the Union, there is significant disagreement about the common debt limit the Union should implement: the limit preferred by some economies...
Persistent link: https://www.econbiz.de/10012605545
Persistent link: https://www.econbiz.de/10012392477
This paper finds optimal fiscal rule parameter values and measures the effects of imposing fiscal rules using a default model calibrated to an economy that in the absence of a fiscal rule pays a significant sovereign default premium. The paper also studies the case in which the government...
Persistent link: https://www.econbiz.de/10014396925