Debt Sustainability with Involuntary Default

Fabrice Collard, Michel Habib, Ugo Panizza and Jean Rochet

No 17357, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies public debt sustainability under the assumption that a country always tries to service its debt obligations. We assume that default decreases the level of resources available for debt service, which consist of the country’s primary surplus and the proceeds from new debt issuance. We show that our model encompasses the well-known result that, as long as r

Keywords: Sovereing debt; Debt sustanainability; Default (search for similar items in EconPapers)
JEL-codes: E62 F34 H63 (search for similar items in EconPapers)
Date: 2022-06
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