Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/167735 
Authors: 
Year of Publication: 
2016
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 4 [Issue:] 2 [Publisher:] MDPI [Place:] Basel [Year:] 2016 [Pages:] 1-11
Publisher: 
MDPI, Basel
Abstract: 
This paper analyzes different government debt relief programs in the European Monetary Union. I build a model and study different options ranging from debt relief to the European Stability Mechanism (ESM). The analysis reveals the following: First, patient countries repay debt, while impatient countries more likely consume and default. Second, without ESM loans, indebted countries default anyway. Third, if the probability to be an impatient government is high, then the supply of loans is constrained. In general, sustainable and unsustainable governments should be incentivized differently especially in a supranational monetary union. Finally, I develop policy recommendations for the ongoing debate in the Eurozone.
Subjects: 
European Monetary Union
debt relief
debt crisis
European Stability Mechanism
JEL: 
E42
F34
H81
G28
H63
E61
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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