Preemptive austerity with rollover risk

• 成果类型: Article
• 署名作者: Conesa, Juan Carlos; Kehoe, Timothy J.
• 署名单位: State University of New York (SUNY) System; Stony Brook University; University of Minnesota System; University of Minnesota Twin Cities; Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; National Bureau of Economic Research
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2024.103914
• 发表日期: 2023
• 关键词: Debt crisis; Rollover crisis; fiscal policy; labor taxes; Eurozone

摘要

By preemptive austerity, we mean a policy that increases taxes to deter potential rollover crises. The policy is so successful that the usual danger signal of a rollover crisis, a high yield on new bonds sold, does not show up, because the policy eliminates the danger. Mechanically, high taxes make the safe zone in the model - the set of sovereign debt levels for which the government prefers to repay its debt rather than default - larger. By announcing a high tax rate at the beginning of the period, the government ensures that tax revenue will be high enough to service sovereign debt becoming due, which deters panics by international lenders but is ex -post suboptimal. That is why, as it engages in preemptive austerity, the government continues to reduce the level of debt to a point where, at least asymptotically, high taxes are no longer necessary.