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On the Welfare Losses from External Sovereign Borrowing

Author

Listed:
  • Mark Aguiar

    (Princeton University)

  • Manuel Amador

    (University of Minnesota and Federal Rese)

  • Stelios Fourakis

    (University of Minnesota)

Abstract

This paper studies the losses to the citizenry when the private agents discount the future at different rates than 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 quantities the potential welfare losses that citizens suffer from the government's access to international bond markets.

Suggested Citation

  • Mark Aguiar & Manuel Amador & Stelios Fourakis, 2019. "On the Welfare Losses from External Sovereign Borrowing," 2019 Meeting Papers 435, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:435
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    Citations

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    Cited by:

    1. Nicolas End, 2021. "The Prince and Me A model of Fiscal Credibility," Working Papers halshs-03222115, HAL.
    2. Grosse-Steffen, Christoph & Pagenhardt, Laura & Rieth, Malte, 2025. "Committed to flexible fiscal rules," Journal of Monetary Economics, Elsevier, vol. 154(C).
    3. Cristina Arellano & Gabriel Mihalache & Yan Bai, 2018. "Inflation Targeting with Sovereign Default Risk," 2018 Meeting Papers 851, Society for Economic Dynamics.
    4. Samano, Agustin, 2022. "International reserves and central bank independence," Journal of International Economics, Elsevier, vol. 139(C).
    5. 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).
    6. Acharya, Viral V. & Rajan, Raghuram G. & Shim, Jack B., 2024. "Sovereign debt and economic growth when government is myopic and self-interested," Journal of International Economics, Elsevier, vol. 150(C).
    7. Vincenzo Cuciniello & Claudio Michelacci & Luigi Paciello, 2025. "Subsidizing Business Entry in Competitive Credit Markets," Journal of Political Economy, University of Chicago Press, vol. 133(11), pages 3652-3711.
    8. Mark Aguiar, 2025. "The Costs and Consequences of Sovereign Borrowing," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 73(1), pages 1-19, March.
    9. Guler, Bulent & Önder, Yasin Kürşat & Taskin, Temel, 2025. "Sovereign Debt Disclosure," Journal of International Economics, Elsevier, vol. 157(C).
    10. Dvorkin, Maximiliano & Sánchez, Juan M. & Sapriza, Horacio & Yurdagul, Emircan, 2022. "Improving sovereign debt restructurings," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    11. Yasin Kursat Onder, 2023. "Optimal GDP-indexed Bonds," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 747-777, December.
    12. Acharya, Viral V. & Rajan, Raghuram G. & Shim, Jack B., 2024. "Reprint of “Sovereign debt and economic growth when government is myopic and self-interested”," Journal of International Economics, Elsevier, vol. 149(C).
    13. 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.
    14. Mr. Julien Acalin & Mr. Leonardo Martinez & Mr. Francisco Roch, 2025. "Fiscal Rules, Robust Correction Mechanisms, and Sovereign Spreads," IMF Working Papers 2025/195, International Monetary Fund.

    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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