Bitte verwenden Sie diesen Link, um diese Publikation zu zitieren, oder auf sie als Internetquelle zu verweisen: https://hdl.handle.net/10419/113653 
Erscheinungsjahr: 
2015
Schriftenreihe/Nr.: 
CFS Working Paper Series No. 508
Verlag: 
Goethe University Frankfurt, Center for Financial Studies (CFS), Frankfurt a. M.
Zusammenfassung: 
We develop a dynamic recursive model where political and economic decisions interact, to study how excessive debt-GDP ratios affect political sustainability of prudent fiscal policies. Rent seeking groups make political decisions - to cooperate (or not) - on the allocation of fiscal budgets (including rents) and issuance of sovereign debt. A classic commons problem triggers collective fiscal impatience and excessive debt issuing, leading to a vicious circle of high borrowing costs and sovereign default. We analytically characterize debt-GDP thresholds that foster cooperation among rent seeking groups and avoid default. Our analysis and application helps in understanding the politico-economic sustainability of sovereign rescues, emphasizing the need for fiscal targets and possible debt haircuts. We provide a calibrated example that quantifies the threshold debt-GDP ratio at 137%, remarkably close to the target set for private sector involvement in the case of Greece.
Schlagwörter: 
sovereign debt
rent seeking
world interest rates
international lending
incentive compatibility
tragedy of the commons
EU crisis
Grexit
Graccident
JEL: 
H63
F34
F36
G01
E44
E43
D72
Persistent Identifier der Erstveröffentlichung: 
Dokumentart: 
Working Paper

Datei(en):
Datei
Größe
933.53 kB





Publikationen in EconStor sind urheberrechtlich geschützt.