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CREI Lectures in Macroeconomics
About This Book
An integrated approach to the economics of sovereign default Fiscal crises and sovereign default repeatedly threaten the stability and growth of economies around the world. Mark Aguiar and Manuel Amador provide a unified and tractable theoretical framework that elucidates the key economics behind sovereign debt markets, shedding light on the frictions and inefficiencies that prevent the smooth functioning of these markets, and proposing sensible approaches to sovereign debt management. The Economics of Sovereign Debt and Default looks at the core friction unique to sovereign debtâthe lack of strong legal enforcementâand goes on to examine additional frictions such as deadweight costs of default, vulnerability to runs, the incentive to "dilute" existing creditors, and sovereign debt's distortion of investment and growth. The book uses the tractable framework to isolate how each additional friction affects the equilibrium outcome, and illustrates its counterpart using state-of-the-art computational modeling. The novel approach presented here contrasts the outcome of a constrained efficient allocationâone chosen to maximize the joint surplus of creditors and governmentâwith the competitive equilibrium outcome. This allows for a clear analysis of the extent to which equilibrium prices efficiently guide the government's debt and default decisions, and of what drives divergences with the efficient outcome.Providing an integrated approach to sovereign debt and default, this incisive and authoritative book is an ideal resource for researchers and graduate students interested in this important topic.
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Table of contents
- Cover
- Contents
- List of Figures
- List of Tables
- Acknowledgments
- 1. Introduction
- 2. Limited Commitment
- 3. Growth under Limited Commitment
- 4. IncompleteMarkets
- 5. The Standard One-Period Bond Model
- 6. Self-Fulfilling Debt Crises
- 7. Long-Term Bonds
- 8. Conclusion
- Bibliography
- Index