In this paper we produce a theory of partial default applicable to sovereign debt. The theory uses Markovian equilibria and the notion that circulating unpaid coupons of any given country courtail its productive capabilities. As a consequence no issues of equilibrium selection appear in the analysis. The theory allows for renegotiation of the debt which occurs in particular dire circumstances. This theory, in contrast with the ones in the literature, is consistent with the main facts of international debt crises, which we document.
|Date of creation:||2013|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
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- Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2002.
"A Quantitative Theory of Unsecured Consumer Credit with Risk of Default,"
Centro de Altisimos Estudios Rios Pe©rez(CAERP)
2, Centro de Altisimos Estudios Rios Perez (CAERP).
- Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & José-Víctor Ríos-Rull, 2007. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Econometrica, Econometric Society, vol. 75(6), pages 1525-1589, November.
- Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2007. "A quantitative theory of unsecured consumer credit with risk of default," Working Papers 07-16, Federal Reserve Bank of Philadelphia.
- David Benjamin, 2008. "Recovery Before Redemption," 2008 Meeting Papers 531, Society for Economic Dynamics.
- Xavier Mateos-Planas, 2011. "Consumer default with complete markets," 2011 Meeting Papers 954, Society for Economic Dynamics.
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