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Debt Fragility and Bailouts / Russell Cooper.
- Format:
- Book
- Author/Creator:
- Cooper, Russell.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18377.
- NBER working paper series no. w18377
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- This paper studies debt fragility and the sharing of the resulting strategic uncertainty through ex post bailouts. Default arises in equilibrium because of both fundamental shocks and beliefs. The probability of default depends on borrowing rates and, in equilibrium, on the beliefs of lenders about this probability. This interaction creates a strategic complementarity and thus the basis for strategic uncertainty. The paper analyzes the role of credible ex post bailouts as a means of sharing both fundamental and strategic uncertainty. While bailouts may occur in some states, debt fragility remains.
- Notes:
- Print version record
- September 2012.
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