Modelling Monetary and Fiscal Governance in the Wake of the Sovereign Debt Crisis in Europe

Clicks: 195
ID: 269990
2016
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Abstract
This paper analyzes different government debt relief programs in the European Monetary Union. I build a model and study different options ranging from debt relief to the European Stability Mechanism (ESM). The analysis reveals the following: First, patient countries repay debt, while impatient countries more likely consume and default. Second, without ESM loans, indebted countries default anyway. Third, if the probability to be an impatient government is high, then the supply of loans is constrained. In general, sustainable and unsustainable governments should be incentivized differently especially in a supranational monetary union. Finally, I develop policy recommendations for the ongoing debate in the Eurozone.
Reference Key
herzog2016economiesmodelling Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Bodo Herzog;Herzog, Bodo;
Journal economies
Year 2016
DOI
10.3390/economies4020009
URL
https://dx.doi.org/10.3390/economies4020009
Keywords
european monetary union debt relief debt crisis european stability mechanism

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