Is It Too Late to Bail Out the Troubled Countries in the Eurozone?
AbstractIn January 1995, U.S. President Bill Clinton organized a bailout for Mexico that imposed penalty interest rates and induced the Mexican government to reduce its debt, ending the debt crisis. Can the Troika (European Commission, European Central Bank, and International Monetary Fund) organize similar bailouts for the troubled countries in the Eurozone? Our analysis suggests that debt levels are so high that bailouts with penalty interest rates could induce the Eurozone governments to default rather than reduce their debt. A resumption of economic growth is one of the few ways that the Eurozone crises can end.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 497.
Length: 12 pages
Date of creation: 05 Feb 2014
Date of revision:
Other versions of this item:
- Juan Carlos Conesa & Timothy J. Kehoe, 2014. "Is It Too Late to Bail Out the Troubled Countries in the Eurozone?," American Economic Review, American Economic Association, vol. 104(5), pages 88-93, May.
- Juan Carlos Conesa & Timothy J. Kehoe, 2014. "Is It Too Late to Bail Out the Troubled Countries in the Eurozone?," NBER Working Papers 19909, National Bureau of Economic Research, Inc.
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-05 (All new papers)
- NEP-CBA-2014-04-05 (Central Banking)
- NEP-EEC-2014-04-05 (European Economics)
- NEP-OPM-2014-04-05 (Open Economy Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Juan Carlos Conesa & Timothy J. Kehoe, 2012.
"Gambling for redemption and self-fulfilling debt crises,"
465, Federal Reserve Bank of Minneapolis.
- Timothy Kehoe & Juan Carlos Conesa, 2012. "Gambling for Redemption and Self-Fulfilling Debt Crises," 2012 Meeting Papers 614, Society for Economic Dynamics.
- Cole, Harold L & Kehoe, Timothy J, 2000.
"Self-Fulfilling Debt Crises,"
Review of Economic Studies,
Wiley Blackwell, vol. 67(1), pages 91-116, January.
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