Endogenous debt crises

Daniel Cohen and Sébastien Villemot

Journal of International Money and Finance, 2015, vol. 51, issue C, 337-369

Abstract: We distinguish two types of debt crises: those that are the outcome of exogenous shocks (to productivity growth for instance) and those that are endogenously created, either by self-fulfilling panic in financial markets or by the reckless behavior of “Panglossian” borrowers. After Krugman, we characterize as “Panglossian” those borrowers who only focus on their best growth prospects, anticipating to default on their debt if hit by an adverse shock, rationally ignoring the risk of default.

Keywords: Sovereign debt; Self-fulfilling crises (search for similar items in EconPapers)
JEL-codes: F34 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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Working Paper: Endogenous Debt Crises (2015)
Working Paper: Endogenous debt crises (2015)
Working Paper: Endogenous Debt Crises (2015)
Working Paper: Endogenous debt crises (2015)
Working Paper: Endogenous debt crises (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:51:y:2015:i:c:p:337-369

DOI: 10.1016/j.jimonfin.2014.11.005

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