A contraction for sovereign debt models

• 成果类型: Article
• 署名作者: Aguiar, Mark; Amador, Manuel
• 署名单位: Princeton University; Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2019.08.005
• 发表日期: 2019
• 页码: 842-875
• 关键词: sovereign debt; Uniqueness of equilibria; Existence of equilibria; Eaton-Gersovitz; One period bonds; Time-consistency

摘要

Using a dual representation, we show that the Markov equilibria of the one-period-bond Eaton and Gersovitz (1981) incomplete markets sovereign debt model can be represented as a fixed point of a contraction mapping, providing a new proof of the uniqueness and existence of equilibrium in the benchmark sovereign debt model. The arguments can be extended to incorporate re-entry probabilities after default when the shock process is iid. Our representation of the equilibrium bears many similarities to an optimal contracting problem. We use this to argue that commitment to budget rules has no value to a benevolent government. We show how the introduction of long-term bonds breaks the link to the constrained planning problem. (C) 2019 Elsevier Inc. All rights reserved.