On the Welfare Losses from External Sovereign Borrowing
Manuel Amador () and
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Mark Aguiar: Princeton University
Manuel Amador: Federal Reserve Bank of Minneapolis
Stelios Fourakis: University of Minnesota
IMF Economic Review, 2020, vol. 68, issue 1, No 6, 163-194
Abstract This paper studies the losses to the citizenry when the private agents discount the future at different rates from their government. In the presence of such a disagreement, the private sector may prefer an environment in which the government is in financial autarky. Using a sequence of sovereign debt models, the paper quantifies the potential welfare losses that citizens suffer from the government’s access to international bond markets. While the environment is not necessarily comprehensive, the analysis provides a counterweight to proposals that are designed to ease market access for sovereign borrowers.
JEL-codes: F34 F41 (search for similar items in EconPapers)
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