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Sovereign debt and structural reforms

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  • معلومة اضافية
    • Collection:
      UPF Digital Repository (Universitat Pompeu Fabra, Barcelona)
    • نبذة مختصرة :
      We construct a dynamic theory of sovereign debt and structural reforms with three interacting frictions: limited enforcement, limited commitment, and incomplete markets. A sovereign country in recession issues debt to smooth consumption and makes reforms to speed up recovery. The sovereign can renege on debt by suffering a stochastic cost, in which case debt is renegotiated. The competitive Markov equilibrium features large fluctuations in consumption and reform effort. We contrast the equilibrium with an optimal contract with one-sided commitment. A calibrated model can match several salient facts about debt crises. We quantify the welfare effect of relaxing different frictions. ; The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
    • File Description:
      application/pdf
    • Relation:
      ADEMU Working Paper Series;56; info:eu-repo/grantAgreement/EC/H2020/649396; http://hdl.handle.net/10230/28283
    • الدخول الالكتروني :
      http://hdl.handle.net/10230/28283
    • Rights:
      This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed. ; http://creativecommons.org/licenses/by/4.0/ ; info:eu-repo/semantics/openAccess
    • الرقم المعرف:
      edsbas.5C1F6BFA