A Theory of War Finance / Herschel I. Grossman, Taejoon Han.

Format:

Book

Author/Creator:

Grossman, Herschel I.

Contributor:

National Bureau of Economic Research.

Han, Taejoon.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3799.

NBER working paper series no. w3799

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Summary:

This paper analyzes the financial and war-spending policies of a state that faces a war in which defeat would result in the loss of sovereign power and in which the material consequences, conditional on avoiding defeat, are stochastic. The analysis takes explicit account of the historical experiences of lenders, who face debt repudiation if the state to whom they have lent is defeated and who also face partial default if the material consequences of the war are unfavorable for the debtor state, even if it avoids defeat. In this analysis, the state uses war debt to smooth expected consumption intertemporally in response to temporary war spending, and the state also uses contingent debt servicing to insure realized consumption against the risk associated with the material consequences of the war.

Notes:

Print version record

August 1991.