This paper explores the welfare effects of the seniority requirement of the international lender of the last resort (ILLR). An ILLR with seniority decreases the interest burden of the country because ILLR accepts a lower interest rate due to the higher chance of getting repaid. On the other...

Currency and financial turmoils in international capital markets have been the focus of an extensive theoretical research which started around 30 years ago. This paper provides a synthetic overview of this theoretical modeling. We analyze the basic analytical framework corresponding to the...

The aim is to show how and when government insolvency implies a fixed exchange rate regime crisis. To model these issues I try to unify a stylized macroeconomic model with a standard micro agent behavior toward asset pricing. The equilibrium condition between demand and supply of public debt,...

The European sovereign debt crisis revived the discussion concerning the pros and cons of exchange rate adjustment in the face of asymmetric shocks. Exit from the euro area is to regain rapidly international competitiveness. Exchange rate stability with structural reforms could be beneficial for...

The European sovereign debt crisis revived the discussion concerning the pros and cons of exchange rate adjustment in the face of asymmetric shocks. Exit from the euro area is to regain rapidly international competitiveness. Exchange rate stability with structural reforms could be beneficial for...

Current discussions among major economists finds significant disagreement in defining the status of the global economy. This article examines the main themes in the context of the theories presented on savings, consumption and investment. The primitive society concept of “limited good”...

This Article argues that the norms and legal practices of global finance in the arenas of sovereign debt and private wealth have led to a significant market failure, in particular the over-supply of sovereign borrowing and a related misallocation of global capital away from its most productive...

The paper explores the interaction between debt crises and devaluation. Since the optimal level of devaluation in a crisis depends on the level of debt that has to be serviced, a default makes a devaluation less likely. Expected devaluation depends thus on expectations about default which is...

The paper explores the interaction between debt crises and devaluation. Since the optimal level of devaluation in a crisis depends on the level of debt that has to be serviced, a default makes a devaluation less likely. Expected devaluation depends thus on expectations about default which is...