Sovereign Debt and Structural Reforms

@article{Mller2015SovereignDA,
  title={Sovereign Debt and Structural Reforms},
  author={Andreas M{\"u}ller and Kjetil Storesletten and Fabrizio Zilibotti},
  journal={CEPR Discussion Paper Series},
  year={2015}
}
Motivated the European debt crisis, we construct a tractable theory of sovereign debt and structural reforms under limited commitment. The government of a sovereign country which has fallen into a recession of an uncertain duration issues one-period debt and can renege on its obligations by suffering a stochastic default cost. When faced with a credible default threat, creditors can make a take-it-or-leave-it debt haircut offer to the sovereign. The risk of renegotiation is reflected in the… 
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  • C. Galli
  • Economics
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