Slow Moving Debt Crises

• 成果类型: Article
• 署名作者: Lorenzoni, Guido; Werning, Ivan
• 署名单位: Northwestern University; Massachusetts Institute of Technology (MIT)
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20141766
• 发表日期: 2019
• 页码: 3229-3263
• 关键词: default; sustainability

摘要

We study slow moving debt crises: self-fulfilling equilibria in which high interest rates, due to the fear of a future default, lead to a gradual but faster accumulation of debt, ultimately validating investors' fear We show that slow moving crises arise in a variety of settings, both when fiscal policy follows a given rule and wizen it is chosen by an optimizing government. A key assumption, in all these settings, is that the borrowing government cannot commit to issue a fixed amount of bonds in a given period. We discuss how multiplicity is avoided for low debt levels, for sufficiently responsive fiscal policy rules, and for long enough debt maturities. When the equilibrium is unique, debt dynamics are characterized by a tipping point, below which debt falls and stabilizes and above which debt and default rates grow.