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International coordination of debt rules with time‐inconsistent voters

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  • Ryo Arawatari
  • Tetsuo Ono

Abstract

In this study, we investigate the international coordination of debt rules in an economy consisting of several countries with varying degrees of present bias. A case wherein each country sets its own uncoordinated debt rules is compared with a case wherein 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 countries with weak present‐biased preferences have little incentive to follow the coordinated rule.

Suggested Citation

  • Ryo Arawatari & Tetsuo Ono, 2023. "International coordination of debt rules with time‐inconsistent voters," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(1), pages 29-60, February.
    • Handle: RePEc:bla:jpbect:v:25:y:2023:i:1:p:29-60
    DOI: 10.1111/jpet.12577
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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