Sovereign Bailouts

Leonardo Martinez, Juan Hatchondo, Burhanettin Kuruscu and Bulent Guler
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Burhanettin Kuruscu: University of Toronto

No 1278, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: We extend the standard Eaton and Gersovitz (1981) sovereign default model to study bailout policies. In our setup a country that concentrates a significant fraction of bond holders decide on a period by period basis whether to bailout a debtor government. The combination of bailout policies and decentralized lending decisions give rise to a pecuniary externality.

Date: 2014
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:1278

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