International Coordination of Debt Rules with Time-inconsistent Voters

Ryo Arawatari and Tetsuo Ono

MPRA Paper from University Library of Munich, Germany

Abstract: In this study, we investigate the international coordination of debt rules in an economy consisting of a large number of countries with varying degrees of present bias. A case whereby each country sets its own uncoordinated debt rules is compared with a case whereby all countries have common coordinated debt rules. Countries with weak present-biased preferences increase their debt issuance and suffer from welfare losses by participating in coordination. In contrast, countries with strong present-biased preferences reduce their debt issuance and can enjoy welfare improvement by participating in coordination. The contrasting results suggest the possibility that the former have little incentive to follow the coordinated rule.

Keywords: Debt rules; Debt ceilings; Present bias; International coordination (search for similar items in EconPapers)
JEL-codes: D72 D78 H62 H63 (search for similar items in EconPapers)
Date: 2020-11-20
New Economics Papers: this item is included in nep-cdm
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Journal Article: International coordination of debt rules with time‐inconsistent voters (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104274

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