The Welfare Cost of Sovereign Default and Liquidity Injections

Preprint OPEN
Guangling Liu (2014)
  • Subject: sovereign default, welfare cost, debt crisis, rollover risk, liquidity
    • jel: jel:E63 | jel:E58 | jel:E50 | jel:G18

This paper develops a dynamic general equilibrium model with endogenous default on entrepreneur loans and funds borrowed from the central bank (liquidity injections) and investigates the welfare cost of sovereign default. The results show that sovereign default affects ... View more
  • References (29)
    29 references, page 1 of 3

    Arellano, C., 2008. Default risk and income °uctuations in emerging economies. American Economic Review 98, 690{712.

    Calvo, G., 1983. Staggered prices in a utility-maximizing framework. Journal of Monetary Economy 12 (3), 383{398.

    Cole, H. L., Kehoe, T. J., 2000. Self-ful¯lling debt crises. Review of Economic Studies 67, 91{116.

    Curdia, V., Woodford, M., 2011. The central-bank balance sheet as an instrument of monetary policy. Journal of Monetary Economics 58, 54{79.

    De Walque, G., Pierrard, O., Rouabah, A., 2010. Financial (in)stability, supervision and liquidity injections: a dynamic general equilibrium approach. The Economic Journal 120, 1234{1261.

    D'Erasmo, P., Mendoza, E. G., 2012. Domestic sovereign default as optimal redistributive policy. Memo.

    Dubey, P., Geanakoplos, J., Shubik, M., 2005. Default and punishment in general equilibrium. Econometrica 73 (1), 1{37.

    Edge, R., 2003. A utility-based welfare criterion in a model with endogenous capital accumulation. Federal Reserve Board, Working Paper Series no. 68.

    Elul, R., 2008. Collateral, credit history, and the ¯nancial decelerator. Journal of Financial Intermediation 17, 63{88.

    Goodhart, C., Sunirand, P., Tsomocos, D., 2006. A model to analyse ¯nancial fragility. Economic Theory 27, 107{142.

  • Metrics
    No metrics available
Share - Bookmark