Collateral, Liquidity and Debt Sustainability
Bibliographic Data
| ID | 9703726 |
|---|---|
| Authors | Steffen Niemann (0000-0002-6604-0684, University of Essex), Stefan Niemann (University of Essex), Paul Pichler (0000-0001-9620-2958, Oesterreichische Nationalbank and University of Vienna) |
| Year | 2017 |
| Volume | 127 |
| Issue | 604 |
| Pages | 2093-2126 |
| Publication date | 2017-09-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/ecoj.12384 |
| OpenAlex | W1500372110 |
| Language | EN |
| References cited | 30 |
We study Markov‐perfect optimal fiscal policy in an economy with financial frictions and sovereign default in the form endogenously determined haircuts on outstanding debt. Government bonds facilitate tax smoothing but also provide collateral and liquidity services that mitigate financial frictions. A debt Laffer curve exists, which induces the government to issue bonds to a point where marginal debt has negative welfare effects. Debt positions in the order of magnitude of annual output remain sustainable despite the option to default. When default happens, liquidity on the bond market is impaired, which can trigger extended periods of recurrent haircuts
Bond · Collateral · Debt · Debt-to-GDP ratio · Economics · Financial system · Fiscal policy · Government Debt · Internal debt · Liquidity crisis · Macroeconomics · Market liquidity · Monetary economics · Recourse debt · Sovereign default · Sovereignty · Finance · Fiscal Policies and Political Economy · Fiscal Policy and Economic Growth · Monetary Policy and Economic Impact
The Returns to Entrepreneurial Investment
Why a Stubborn Conservative would Run a Deficit
Debt with Potential Repudiation
Uninsured Idiosyncratic Risk and Aggregate Saving
Optimal fiscal and monetary policy in an economy without capital
A model of unconventional monetary policy
A Positive Theory of Fiscal Deficits and Government Debt
On the Determination of the Public Debt
Private and Public Supply of Liquidity
Optimal Taxation without State‐Contingent Debt
The Forgotten History of Domestic Debt
A General Equilibrium Model of Sovereign Default and Business Cycles
Default Risk and Income Fluctuations in Emerging Economies
| Citation velocity | historical |
|---|---|
| Highly cited | No |