IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_7677.html

Compliance effects of sovereign debt cuts

Author

Listed:
  • Eckhard Janeba
  • Armin Steinbach

Abstract

The controversy about sovereign debt cuts loomed prominently throughout crisis in the European Union (EU), as the EU legal rules were viewed to impose strict limitations on debt restructuring involving public creditors due to moral hazard concerns enshrined in the legal ban on bailouts. This analysis explores the economic plausibility of the legal regime, with the applicable legal standard capturing the impact of debt restructuring on the debtor’s expected compliance with fiscal rules. Our theory shows that the effect of debt cuts on fiscal compliance depends on three effects, the direction of which determines the overall effect on expected fiscal compliance. We empirically review the plausibility of our theoretical results by exploiting survey data from members of state parliaments in Germany. Data limitations notwithstanding, our results offer some plausibility that haircuts can make fiscal compliance more attractive and likely.

Suggested Citation

  • Eckhard Janeba & Armin Steinbach, 2019. "Compliance effects of sovereign debt cuts," CESifo Working Paper Series 7677, CESifo.
    • Handle: RePEc:ces:ceswps:_7677
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp7677_0.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • H00 - Public Economics - - General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_7677. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.