Bargained haircuts and debt policy implications
Carregando...
Arquivos
Data
2017-12
Orientador(res)
Métricas
Título da Revista
ISSN da Revista
Título de Volume
Resumo
We extend the Cole and Kehoe model (J Int Econ 41:309-330, 1996) by adding a Rubinstein bargaining game between creditors and debtor country to determine the share of debt repayment in a sovereign debt crisis. Ex-post, the possibility of partial repayment avoids the costly case of total default, as seen recently in Greece. Ex-ante, the effects are to increase the sovereign debt cap and delay the fiscal adjustment. In other words, expectations of a haircut in times of crisis relax leverage restrictions implied by financial markets and make government more lenient, suggesting caution with haircut adoption, especially when risk-free interest rates are low.
Descrição
Conteúdo online de acesso restrito pelo editor