Tough Policies, Incredible Policies?

@article{Neut2003ToughPI,
  title={Tough Policies, Incredible Policies?},
  author={A. Neut and A. Velasco},
  journal={Macroeconomics eJournal},
  year={2003}
}
  • A. Neut, A. Velasco
  • Published 2003
  • Economics
  • Macroeconomics eJournal
  • We revisit the question of what determines the credibility of macroeconomic policies here, of promises to repay public debt. Almost all thinking on the issue has focused on governments' strategic decision to default (or erode the value of outstanding debt via inflation/devaluation). But sometimes governments default not because they want to, but because they cannot avoid it: adverse shocks leave them no option. We build a model in which default/devaluation can occur deliberately (for strategic… CONTINUE READING

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