ONLINE: Seminar in Makroökonomik - Fiscal Expenditure Consolidation and Sovereign Debt Relief: Front-loaded or Back-loaded
Wann
Montag, 19. April 2021
17 bis 18:15 Uhr
Wo
online
Veranstaltet von
Lehrstuhl für Außenwirtschaftstheorie und Politische Ökonomie
Vortragende Person/Vortragende Personen:
Tamon Asonuma (International Monetary Fund)
Wegen des Zeitunterschieds findet das Seminar von 17:00 - 18:15 Uhr MEZ statt.
Fiscal Expenditure Consolidation and Sovereign Debt Relief: Front-loaded or Back-loaded
(mit Hyungseok Joo)
Abstract: Sovereigns implement front-loaded fiscal expenditure consolidation prior to preemptive restructurings, while back-loaded consolidation upon defaults/post-default restructurings. We show that public investment (i) declines sharply prior to preemptive restructurings and recovers after settlement, (ii) declines sharply upon post-default restructurings and recovers before settlement, (iii) recovers quickly in preemptive episodes. We develop a theoretical model of defaultable debt that embeds endogenous choice of preemptive and post-default renegotiations, public capital accumulation, and expenditure composition. The model quantitatively shows the sovereign's voluntary commitment to front-loaded consolidation results in preemptive restructurings achieving quick public investment recovery and debt settlement. Data support these theoretical predictions