The feedback loop between sovereign and financial sector insolvency has been identified as a key driver of the European debt crisis and has motivated an array of policy proposals. We revisit this “doom-loop” focusing on governments' incentives to default. To this end, we present a simple 3-period model with strategic sovereign default, where debt is held by domestic banks and foreign investors. The government maximizes domestic welfare, and thus the temptation to default increases with externally-held debt.

Inscripciones Aquí

Asista al seminario presencial inscribiéndose al correo: [email protected] 

Zoom: https://uniandes-edu-co.zoom.us/meeting/register/tZIlcOmhqj4vHtKZoLkXk1jPdrqYCfIpp7Zg