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On the Welfare Losses from External Sovereign Borrowing

Author

Listed:
  • Mark Aguiar

    (Princeton University)

  • Manuel Amador

    (Federal Reserve Bank of Minneapolis
    University of Minnesota)

  • Stelios Fourakis

    (University of Minnesota)

Abstract

This paper studies the losses to the citizenry when the private agents discount the future at different rates from 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 quantifies the potential welfare losses that citizens suffer from the government’s access to international bond markets. While the environment is not necessarily comprehensive, the analysis provides a counterweight to proposals that are designed to ease market access for sovereign borrowers.

Suggested Citation

  • Mark Aguiar & Manuel Amador & Stelios Fourakis, 2020. "On the Welfare Losses from External Sovereign Borrowing," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(1), pages 163-194, March.
    • Handle: RePEc:pal:imfecr:v:68:y:2020:i:1:d:10.1057_s41308-019-00103-2
    DOI: 10.1057/s41308-019-00103-2
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    Cited by:

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    2. Cristina Arellano & Gabriel Mihalache & Yan Bai, 2018. "Inflation Targeting with Sovereign Default Risk," 2018 Meeting Papers 851, Society for Economic Dynamics.
    3. 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).
    4. Cuciniello, Vincenzo & Michelacci, Claudio & Paciello, Luigi, 2023. "Subsidizing Business Entry in Competitive Credit Markets," CEPR Discussion Papers 18335, C.E.P.R. Discussion Papers.
    5. Dvorkin, Maximiliano & Sánchez, Juan M. & Sapriza, Horacio & Yurdagul, Emircan, 2022. "Improving sovereign debt restructurings," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    6. 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.
    7. Samano, Agustin, 2022. "International reserves and central bank independence," Journal of International Economics, Elsevier, vol. 139(C).

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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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