External and Public Debt Crises

Cristina Arellano, Andrew Atkeson and Mark Wright

No 515, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: The recent debt crises in Europe and the U.S. states feature similar sharp increases in spreads on government debt but also show important differences. In Europe, the crisis occurred at high government indebtedness levels and had spillovers to the private sector. In the United States, state government indebtedness was low, and the crisis had no spillovers to the private sector. We show theoretically and empirically that these different debt experiences result from the interplay between differences in the ability of governments to interfere in private external debt contracts and differences in the flexibility of state fiscal institutions.

Keywords: Tax flexibility; Sudden stops; Debt crises; Interference with private contracts (search for similar items in EconPapers)
JEL-codes: F3 H7 K1 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2015-07-07
New Economics Papers: this item is included in nep-cta
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: External and Public Debt Crises (2016)
Chapter: External and Public Debt Crises (2015)
Working Paper: External and Public Debt Crises (2015)
Working Paper: External and Public Debt Crises (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:515

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