The dynamics of sovereign default risk and political turnover

Scholl, Almuth

The dynamics of sovereign default risk and political turnover

Dateien

Scholl_2-1e4t9iy2j67qj0.PDFGröße: 235.42 KBDownloads: 11

Datum

2017

Open Access-Veröffentlichung

Open Access Green

Sammlungen

Wirtschaftswissenschaften

Publikationstyp

Zeitschriftenartikel

Publikationsstatus

Published

Erschienen in

Journal of International Economics. 2017, 108, pp. 37-53. ISSN 0022-1996. eISSN 1873-0353. Available under: doi: 10.1016/j.jinteco.2017.05.002

Zusammenfassung

This paper develops a stochastic dynamic politico-economic model of sovereign debt to analyze the interaction of sovereign default risk and political turnover. Two parties differ in their preferred size of unproductive public spending which is financed by taxes and external debt. Electoral outcomes are characterized by the economic benefits from the incumbent's policies and stochastic idiosyncratic ideological aspects. Quantitative findings suggest that endogenous political turnover increases the discrepancies between the optimal borrowing and default policies of the two parties. Prior to a debt crisis, the incumbent government accumulates external debt to foster the probability of remaining in power. The dynamic interaction of electoral outcomes, external debt, and sovereign default supports arguments for imposing institutional constraints on incumbent governments.

Fachgebiet (DDC)

330 Wirtschaft

Schlagwörter

Sovereign debt, default risk , political turnover, fiscal policy

Zitieren

ISO 690

SCHOLL, Almuth, 2017. The dynamics of sovereign default risk and political turnover. In: Journal of International Economics. 2017, 108, pp. 37-53. ISSN 0022-1996. eISSN 1873-0353. Available under: doi: 10.1016/j.jinteco.2017.05.002

BibTex

@article{Scholl2017dynam-39648,
  year={2017},
  doi={10.1016/j.jinteco.2017.05.002},
  title={The dynamics of sovereign default risk and political turnover},
  volume={108},
  issn={0022-1996},
  journal={Journal of International Economics},
  pages={37--53},
  author={Scholl, Almuth}
}

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