Signalling Fiscal Austerity

  title={Signalling Fiscal Austerity},
  author={anna. gibert},
  • anna. gibert
  • Published 2014
Austerity measures may play the role of a signal about a sovereign’s ability to repay its debt. A country may reduce debt below its optimal level in order to communicate its private information to the lenders. Since the opportunity cost of that reduction is lower for the more able sovereign, austerity is chosen to avoid imitation by the less able, thereby… CONTINUE READING