ON THE ROLE OF DEBT MATURITY IN A MODEL WITH SOVEREIGN RISK AND FINANCIAL FRICTIONS

Stéphane Auray; Aurélien Eyquem

doi:10.1017/S136510051700061X

ON THE ROLE OF DEBT MATURITY IN A MODEL WITH SOVEREIGN RISK AND FINANCIAL FRICTIONS

Stéphane Auray
, Aurélien Eyquem

Université du Littoral Côte d'Opale
Université Lyon 2

Résultats de recherche: Contribution à un journal › Article › Revue par des pairs

Résumé

We develop a model with financial frictions and sovereign default risk wherein the maturity of public debt is allowed to be larger than one period. When the debt portfolio has longer average maturities, public debt increases less in the event of a crisis, reducing the size of the subsequent fiscal consolidation through distorsionary taxes or public spending, with positive effects on welfare. In addition, we provide some results suggesting that optimized fiscal responses to a crisis depend on the average maturity of the debt portfolio.

langue originale	Anglais
Pages (de - à)	2114-2131
Nombre de pages	18
journal	Macroeconomic Dynamics
Volume	23
Numéro de publication	5
Les DOIs	https://doi.org/10.1017/S136510051700061X
état	Publié - 1 juil. 2019
Modification externe	Oui

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10.1017/S136510051700061X

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title = "ON THE ROLE OF DEBT MATURITY IN A MODEL WITH SOVEREIGN RISK AND FINANCIAL FRICTIONS",

abstract = "We develop a model with financial frictions and sovereign default risk wherein the maturity of public debt is allowed to be larger than one period. When the debt portfolio has longer average maturities, public debt increases less in the event of a crisis, reducing the size of the subsequent fiscal consolidation through distorsionary taxes or public spending, with positive effects on welfare. In addition, we provide some results suggesting that optimized fiscal responses to a crisis depend on the average maturity of the debt portfolio.",

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KW - Financial Crisis

KW - Fiscal Policy

KW - Sovereign Default Risk

U2 - 10.1017/S136510051700061X

DO - 10.1017/S136510051700061X

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ON THE ROLE OF DEBT MATURITY IN A MODEL WITH SOVEREIGN RISK AND FINANCIAL FRICTIONS

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