Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259426 
Year of Publication: 
2018
Citation: 
[Journal:] Latin American Economic Review [ISSN:] 2196-436X [Volume:] 27 [Issue:] 1 [Article No.:] 9 [Publisher:] Springer [Place:] Heidelberg [Year:] 2018 [Pages:] 1-19
Publisher: 
Springer, Heidelberg
Abstract: 
Our aim is to explore the role of financial aid in a default episode. To that end, we develop a dynamic stochastic quantitative model of sovereign default featuring fiscal policy, endogenous financial aid and risk-averse foreign lenders. After calibrating the model, we feed output shocks into the model to show that it captures some of the most salient features of the fiscal and debt situation in Argentina during the 1998-2002. This underscores the economic nature of the decision to default and the role that official aid could have taken in avoiding such an event. In effect, given the economic challenges endured by Argentina, a full-fledged default took place. In addition, we discuss a number of policy implications associated with financial aid programs aimed at preventing sovereign default episodes.
Subjects: 
Sovereign default
Fiscal policy
Financial aid
JEL: 
E62
F34
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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