This paper proposes a quantitative theory of the interaction between private and public debt in an open economy …

open economy requests a bailout from an international financial institution, it receives a non-defaultable loan of size G … that comes with imposed debt limits. The government endogenously asks for the bailout during recessions and repays it when … the economy recovers. Hence, the bailout acts as an imperfect state contingent asset that makes the economy better off …

higher growth. Our analysis accommodates costly signaling for gaining credibility and also assigns a novel role to spending …

higher growth. Our analysis accommodates costly signalling for gaining credibility and also assigns a novel role to spending …

analysis accommodates costly signalling for gaining credibility and also assigns a novel role to spending multipliers in the …