Dette publique. Du risque d'insoutenabilité au risque d'illiquidité
AbstractThis paper analyses the risk of default on public debt within a repeated game between the governement and private investors. The government has only an imperfect control over the stream of future revenues. In this case, a long sequence of adverse budgetary shocks may push the debt over its sustainable level, defined as the discounted flow of future primary surpluses. Given this small risk of unsustainability, we put forward a debt threshold above which investors refuse to subscribe to a new debt issue. But this shortage of liquidity suffices to bring about default. Hence, this « illiquidity » threshold becomes the new critical threshold. The series of decreasing critical illiquidity thresholds converges to a limit value. This risk-free debt level may be much lower than the sustainable level. Policy implications call for a more restrictive definition of a sound fiscal stance.Classification JEL : E62, F34, H63
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Bibliographic InfoArticle provided by Presses de Sciences-Po in its journal Revue économique.
Volume (Year): 54 (2003)
Issue (Month): 4 ()
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Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
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- Priscilla Bony, 2012. "Efficacité des politiques de sortie de crise dans la zone euro : l'exemple français," Post-Print dumas-00834841, HAL.
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