History remembered: Optimal sovereign default on domestic and external debt

• 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; National Bureau of Economic Research
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2020.07.006
• 发表日期: 2021
• 关键词: public debt; sovereign default; Debt crisis; European crisis

摘要

Infrequent but turbulent sovereign defaults on domestic creditors were a forgotten history in macroeconomics. We propose a Bewley model in which the government chooses debt and default on domestic and foreign creditors by balancing distributional incentives versus the benefits of debt for self-insurance, liquidity, and risk-sharing. A feedback mechanism links debt issuance, the debt distribution, the default decision, and risk premia. Calibrated to Eurozone data, the model is consistent with key long-run and debt-crisis statistics. Defaults are rare and preceded by surging debt and spreads. Debt sells at the risk-free price most often but lack of commitment cuts sustainable debt sharply. (C) 2020 Elsevier B.V. All rights reserved.