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6 décembre 2024
- ISIDORE Id: 10670/1.57d0bb...
- hal: hal-04822341
info:eu-repo/semantics/OpenAccess
Mots-clés
Sovereign Debt Default Maximum Sustainable Debt E - Macroeconomics and Monetary Economics/E.E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook/E.E6.E62 - Fiscal Policy F - International Economics/F.F3 - International Finance/F.F3.F34 - International Lending and Debt Problems H - Public Economics/H.H6 - National Budget, Deficit, and Debt/H.H6.H63 - Debt • Debt Management • Sovereign DebtSujets proches
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Fabrice Collard et al., « Sovereign Debt Sustainability with Involuntary Default », HAL SHS (Sciences de l’Homme et de la Société), ID : 10670/1.57d0bb...
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Résumé
We study the sustainability of sovereign debt under the assumption of involuntary and costly default: governments do their utmost to avoid default, which reduces the resources available for debt service. We show that costly default tightens Blanchard’s g > r condition. We derive a formula for a government’s maximum sustainable debt (MSD), which depends on the mean and the volatility of the country’s growth rate, the government’s maximum primary surplus, the risk-free rate, and the fraction of resources available to the government in default. We compute MSD for 12 Eurozone countries and examine the role of the European Stability Mechanism in increasing MSD.
