On the Role of Financial Aid in a Default Episode
Gabriel Cuadra (),
Ramos Francia Manuel and
Santiago Garcia-Verdu ()
No 2018-15, Working Papers from Banco de México
We develop a dynamic stochastic quantitative model of sovereign default featuring fiscal policy, endogenous financial aid and risk-averse foreign lenders, in order to explore the role of financial aid in a default episode. 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 period. 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.
Keywords: Sovereign default; fiscal policy; financial aid (search for similar items in EconPapers)
JEL-codes: E62 F34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.banxico.org.mx/publications-and-press/b ... -34388A904384%7D.pdf (application/pdf)
Journal Article: On the role of financial aid in a default episode (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2018-15
Access Statistics for this paper
More papers in Working Papers from Banco de México Contact information at EDIRC.
Bibliographic data for series maintained by Dirección de Sistemas ().