1 option
Distributional Incentives in an Equilibrium Model of Domestic Sovereign Default / Pablo D'Erasmo, Enrique G. Mendoza.
- Format:
- Book
- Author/Creator:
- D'Erasmo, Pablo.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w19477.
- NBER working paper series no. w19477
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2013.
- Summary:
- Europe's debt crisis resembles historical episodes of outright default on domestic public debt about which little research exists. This paper proposes a theory of domestic sovereign default based on distributional incentives affecting the welfare of risk-averse debt- and non-debt holders. A utilitarian government cannot sustain debt if default is costless. If default is costly, debt with default risk is sustainable, and debt falls as concentration of debt ownership rises. A government favoring bond holders can also sustain debt, with debt rising as ownership becomes more concentrated. These results are robust to adding foreign investors, redistributive taxes, or a second asset.
- Notes:
- Print version record
- September 2013.
The Penn Libraries is committed to describing library materials using current, accurate, and responsible language. If you discover outdated or inaccurate language, please fill out this feedback form to report it and suggest alternative language.