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International Lending, Sovereign Debt and Joint Liability : An Economic Theory Model for Amending the Treaty of Lisbon / Kaushik Basu
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Basu, Kaushik
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Bankruptcy and Resolution of Financial Distress.
- Banks & Banking Reform.
- Cross-country liability.
- Debt Markets.
- Economic Theory & Research.
- Eurozone crisis.
- Finance and Financial Sector Development.
- International lending.
- Joint liability.
- Macroeconomics and Economic Growth.
- Sovereign debt.
- Local Subjects:
- Access to Finance.
- Bankruptcy and Resolution of Financial Distress.
- Banks & Banking Reform.
- Cross-country liability.
- Debt Markets.
- Economic Theory & Research.
- Eurozone crisis.
- Finance and Financial Sector Development.
- International lending.
- Joint liability.
- Macroeconomics and Economic Growth.
- Sovereign debt.
- Physical Description:
- 1 online resource (31 pages)
- Other Title:
- International Lending, Sovereign Debt and Joint Liability
- Place of Publication:
- Washington, D.C., The World Bank, 2013
- System Details:
- data file
- Summary:
- As the Eurozone crisis drags on, it is evident that a part of the problem lies in the architecture of debt and its liabilities within the Eurozone and, more generally, the European Union. This paper argues that a large part of the problem can be mitigated by permitting appropriately-structured cross-country liability for sovereign debt incurred by individual nations within the European Union. In brief, the paper makes a case for amending the Treaty of Lisbon. The case is established by constructing a game-theoretic model and demonstrating that there exist self-fulfilling equilibria, which would come into existence if cross-country debt liability were permitted and which are Pareto superior to the existing outcome.
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