DISTRIBUTIONAL INCENTIVES IN AN EQUILIBRIUM MODEL OF DOMESTIC SOVEREIGN DEFAULT

• 成果类型: Article
• 署名作者: D'Erasmo, Pablo; Mendoza, Enrique G.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Philadelphia; University of Pennsylvania
• 刊物名称: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
• ISSN/ISSBN: 1542-4766
• DOI: 10.1111/jeea.12168
• 发表日期: 2016
• 页码: 7-44
• 关键词: fiscal-policy; debt; RISK; GLOBALIZATION

摘要

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 nondebtholders. A utilitarian government cannot sustain debt if default is costless. If default is costly, debt with default risk is sustainable, and debt falls as the 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.