EconPapers    
Economics at your fingertips  
 

The political economy of sovereign defaults

Eugenia Andreasen (), Guido Sandleris and Alejandro Van der Ghote

Journal of Monetary Economics, 2019, vol. 104, issue C, 23-36

Abstract: How do income distribution and the tax system affect sovereign borrowing and default decisions? Are these effects shaped by the political constraints that governments face when raising revenues to repay the debt? To address these questions, we incorporate agent heterogeneity, in terms of income distribution and tax burden, and a political support constraint into a standard DSGE model of sovereign default. The results show that income inequality and regressive taxes make defaults more likely for a given level of debt while they reduce sovereign borrowing in equilibrium. Tighter political support requirements reinforce these effects.

Keywords: Sovereign default; Fiscal policy; Inequality; Political economy (search for similar items in EconPapers)
JEL-codes: E62 F34 H63 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393218305282
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Political Economy of Sovereign Defaults (2011) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:104:y:2019:i:c:p:23-36

DOI: 10.1016/j.jmoneco.2018.09.003

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2023-01-16
Handle: RePEc:eee:moneco:v:104:y:2019:i:c:p:23-36