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External and Public Debt Crises

Author

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  • Arellano, Cristina

    () (Federal Reserve Bank of Minneapolis)

  • Atkeson, Andrew

    (UCLA and NBER)

  • Wright, Mark L. J.

    (Federal Reserve Bank of Chicago)

Abstract

The recent debt crises in Europe and the U.S. states feature similar sharp increases in spreads on government debt but also show important differences. In Europe, the crisis occurred at high government indebtedness levels and had spillovers to the private sector. In the United States, state government indebtedness was low, and the crisis had no spillovers to the private sector. We show theoretically and empirically that these different debt experiences result from the interplay between differences in the ability of governments to interfere in private external debt contracts and differences in the flexibility of state fiscal institutions.

Suggested Citation

  • Arellano, Cristina & Atkeson, Andrew & Wright, Mark L. J., 2015. "External and Public Debt Crises," Working Paper Series WP-2015-5, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-2015-05
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    References listed on IDEAS

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    Cited by:

    1. Barry Eichengreen, 2018. "Deflation and monetary policy," Chapters,in: Economic Stagnation in Japan, chapter 9, pages 183-201 Edward Elgar Publishing.
    2. Ernesto Longobardi & Antonio Pedone, 2018. "On some recent proposals of public debt restructuring in the Eurozone," Chapters,in: Debt Default and Democracy, chapter 6, pages 84-123 Edward Elgar Publishing.
    3. Ricardo Reis, 2015. "Comment on "External and Public Debt Crises"," NBER Chapters,in: NBER Macroeconomics Annual 2015, Volume 30, pages 245-256 National Bureau of Economic Research, Inc.
    4. repec:agr:journl:v:4(605):y:2015:i:4(605):p:189-198 is not listed on IDEAS
    5. Walid BENAYED & Foued Badr GABSI & Samia OMRANE BELGUITH, 2015. "Threshold Effect of Public Debt on Domestic Investment: Evidence from Selected African Countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(605), W), pages 189-198, Winter.
    6. Qaiser Munir & Sook Ching Kok & Winnie Abdulnasir, 2016. "Public debt sustainability and economic growth in Malaysia: Threshold and causality analysis," Proceedings of International Academic Conferences 5306868, International Institute of Social and Economic Sciences.
    7. Phu Nguyen-Van & Florian Grosset & Roberto Martino, 2015. "Critères de convergence, déréglementation du marché du travail et performance économique des régions européennes," Bulletin de l'Observatoire des politiques économiques en Europe, Observatoire des Politiques Économiques en Europe (OPEE), vol. 33(1), pages 3-6, December.
    8. Harinder S. Kohli (ed.), 2016. "The World in 2050: Striving for a More Just, Prosperous, and Harmonious Global Community," Books, Emerging Markets Forum, edition 1, number world2050, August.

    More about this item

    Keywords

    Debt crises; Sudden stops; Interference with private contracts; Tax flexibility;

    JEL classification:

    • F3 - International Economics - - International Finance
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • K1 - Law and Economics - - Basic Areas of Law

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