Séminaire COURNOT – Hubert Kempf (ENS Paris Saclay)

Détails de l'événement :

Titre : Sovereign Defaults and Debt Sustainability: The Debt Recovery Channel.

Résumé : This paper focuses on the debt recovery channel linking the dynamics of public debt to partial sovereign defaults. We build a stochastic model of excusable sovereign default which incorporates a debt recovery rule. It depends on a single
parameter that allows for partial debt recovery. This parameter affects the risk premium included in the valuation of public debt. We show that the maximum debt-to-GDP ratio that a country can sustain without defaulting is increasing,
nonlinear, and sensitive to the debt-recovery parameter. Using the concept of risky steady state, we study the dynamics of public debt when the default premium is taken into account and offer new definitions of public debt unsustainability.
A higher debt recovery parameter increases the fiscal space but worsens the financial position of a borrowing country after a default episode. We show the empirical relevance of this channel for estimating country-specific fiscal spaces..

Lieu du séminaire : Salle Ehud et ZOOM.

Lien ZOOM : https://cnrs.zoom.us/j/95611160792?pwd=bDN1Uzk2dThtRVNJS2k3a3RoMWFBZz09

Agenda des séminaires : https://www.beta-economics.fr//seminaires-cournot-2022-2023/