Quantitative sovereign default models and the European debt crisis

• 成果类型: Article; Proceedings Paper
• 署名作者: Bocola, Luigi; Bornstein, Gideon; Dovis, Alessandro
• 署名单位: Stanford University; National Bureau of Economic Research; Northwestern University; University of Pennsylvania
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2019.01.011
• 发表日期: 2019
• 页码: 20-30

摘要

A large literature has developed quantitative versions of the Eaton and Gersovitz (1981) model to analyze default episodes on external debt. In this paper, we study whether the same framework can be applied to the analysis of debt crises in which domestic public debt plays a prominent role. We consider a model where a government can issue debt to both domestic and foreign investors, and we derive conditions under which their sum is the relevant state variable for default incentives. We then apply our framework to the European debt crisis. We show that matching the cyclicality of public debt rather than that of external debt allows the model to better capture the empirical distribution of interest rate spreads and gives rise to more realistic crises dynamics. (C) 2019 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).