Pflueger, Carolin E.; Yared, Pierre - National Bureau of Economic Research - 2024
We present a dynamic two-country model in which military spending, geopolitical risk, and government bond prices are … rises with geopolitical tensions, and war losers suffer from higher debt devaluation than victors. Even though higher debt …, unless war is realized and induces a hegemonic transition. For high debt capacity, transitional dynamics exhibit geopolitical …