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On the Welfare Losses from External Sovereign Borrowing

Author

Listed:
  • Mark Aguiar

    (Princeton University)

  • Manuel Amador

    (University of Minnesota and Federal Rese)

  • Stelios Fourakis

    (University of Minnesota)

Abstract
This paper studies the losses to the citizenry when the private agents discount the future at different rates than their government. In the presence of such a disagreement, the private sector may prefer an environment in which the government is in financial autarky. Using a sequence of sovereign debt models, the paper quantities the potential welfare losses that citizens suffer from the government's access to international bond markets.

Suggested Citation

  • Mark Aguiar & Manuel Amador & Stelios Fourakis, 2019. "On the Welfare Losses from External Sovereign Borrowing," 2019 Meeting Papers 435, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:435
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    References listed on IDEAS

    as
    1. Juan Carlos Hatchondo & Leonardo Martinez & Francisco Roch, 2022. "Fiscal Rules and the Sovereign Default Premium," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(4), pages 244-273, October.
    2. Mark Aguiar & Manuel Amador & Hugo Hopenhayn & Iván Werning, 2019. "Take the Short Route: Equilibrium Default and Debt Maturity," Econometrica, Econometric Society, vol. 87(2), pages 423-462, March.
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    7. Manuel Amador & Christopher Phelan, 2021. "Reputation and Sovereign Default," Econometrica, Econometric Society, vol. 89(4), pages 1979-2010, July.
    8. Marina Azzimonti, 2011. "Barriers to Investment in Polarized Societies," American Economic Review, American Economic Association, vol. 101(5), pages 2182-2204, August.
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    20. Aguiar, M. & Chatterjee, S. & Cole, H. & Stangebye, Z., 2016. "Quantitative Models of Sovereign Debt Crises," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1697-1755, Elsevier.
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    24. Aguiar, Mark & Amador, Manuel, 2019. "A contraction for sovereign debt models," Journal of Economic Theory, Elsevier, vol. 183(C), pages 842-875.
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    Cited by:

    1. Nicolas End, 2021. "The Prince and Me A model of Fiscal Credibility," Working Papers halshs-03222115, HAL.
    2. Viral V. Acharya & Raghuram G. Rajan & Jack B. Shim, 2023. "Sovereign Debt and Economic Growth When Government Is Myopic and Self-Interested," NBER Chapters, in: NBER International Seminar on Macroeconomics 2023, National Bureau of Economic Research, Inc.
    3. Dvorkin, Maximiliano & Sánchez, Juan M. & Sapriza, Horacio & Yurdagul, Emircan, 2022. "Improving sovereign debt restructurings," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    4. Cristina Arellano & Gabriel Mihalache & Yan Bai, 2018. "Inflation Targeting with Sovereign Default Risk," 2018 Meeting Papers 851, Society for Economic Dynamics.
    5. Samano, Agustin, 2022. "International reserves and central bank independence," Journal of International Economics, Elsevier, vol. 139(C).
    6. Hatchondo, Juan Carlos & Martinez, Leonardo & Roch, Francisco, 2022. "Numerical fiscal rules for economic unions: The role of sovereign spreads," Economics Letters, Elsevier, vol. 210(C).
    7. Acharya, Viral V. & Rajan, Raghuram G. & Shim, Jack B., 2024. "Sovereign debt and economic growth when government is myopic and self-interested," Journal of International Economics, Elsevier, vol. 150(C).
    8. Cuciniello, Vincenzo & Michelacci, Claudio & Paciello, Luigi, 2023. "Subsidizing Business Entry in Competitive Credit Markets," CEPR Discussion Papers 18335, C.E.P.R. Discussion Papers.
    9. Bulent Guler & Yasin Kürsat Önder & Temel Taskin, 2024. "Sovereign Debt Disclosure," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 24/1094, Ghent University, Faculty of Economics and Business Administration.
    10. Acharya, Viral V. & Rajan, Raghuram G. & Shim, Jack B., 2024. "Reprint of “Sovereign debt and economic growth when government is myopic and self-interested”," Journal of International Economics, Elsevier, vol. 149(C).
    11. Bulent Guler & Yasin Kursat Onder & Temel Taskin, 2022. "Asymmetric Information and Sovereign Debt Disclosure," CAEPR Working Papers 2022-004 Classification-E, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.

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    More about this item

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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