Reputation, Bailouts, and Interest Rate Spread Dynamics

• 成果类型: Article
• 署名作者: Dovis, Alessandro; Kirpalani, Rishabh
• 署名单位: University of Pennsylvania; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20190022
• 发表日期: 2022
• 页码: 411-449
• 关键词: debt; default; uncertainty; crises; rules; RISK

摘要

We propose a joint theory for interest rate dynamics and bailout decisions. Interest rate spreads are driven by time-varying fundamentals and expectations of future bailouts. Private agents are uncertain about the government's willingness to bail out and learn by observing its actions. The model provides an explanation for why we observe governments initially refusing to bail out borrowers at the beginning of a crisis even if they eventually end up providing a bailout after the crisis aggravates. The typical equilibrium outcome displays hump-shaped spreads and contagion as was the case in the US financial and European debt crises. (JEL E43, G01, G21, H63, H81)