Borrowing in excess of natural ability to repay
Carregando...
Arquivos
Data
2017-01
Orientador(res)
Métricas
Título da Revista
ISSN da Revista
Título de Volume
Resumo
The paper aims at improving our understanding of self-enforcing debt in competitive dynamic economies with lack of commitment when default induces a permanent loss of access to international credit markets. We show, by means of examples, that a sovereign's creditworthiness is not necessarily limited by the ability to repay out of its future resources. Self-enforcing debt grows at the same rate as interest rates. If a sovereign's endowment growth rates are lower than interest rates, then debt limits eventually exceed the natural debt limits. This implies that there is asymptotic borrowing in present value terms. We show that this can be compatible with lending incentives when credible borrowers facilitate inter-temporal exchange, acting as pass-through intermediaries that alleviate the lenders' credit restrictions. (C) 2016 Elsevier Inc. All rights reserved.
Descrição
Conteúdo online de acesso restrito pelo editor