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HomeSovereign debt dynamics at the brink of default and the special role of supranational lenders
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This paper studies why it is often hard to judge whether a country’s public debt is sustainable. We show that defaults aren’t driven solely by the underlying economy, but also by expectations among lenders—especially in times of crisis. Using a stylised economic model, we explain when governments act cautiously and when they take risks, why the debt maturity profile matters, and how lenders’ beliefs can structurally limit the available financing provided by the market. We also examine the role of international institutions that lend money to countries. We find that when their financial support is well designed, it can prevent crises and compensate for the shortage of private lending. At the same time, financial markets still encourage governments to keep their budgets under control
- Publicado em:
- Autor(es) institucional(ais): Banco Europeu de Investimento
- Temas: Economia ― Finanças
- Tema: ajuda financeira , controlo orçamental , dívida pública , empréstimo concedido , financiamento , instituição financeira , modelo económico , pagamento , risco financeiro
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| ISSN 2599-736X | ISBN 978-92-861-6166-7 | DOI 10.2867/8652135 | Número de catálogo QH-01-26-009-EN-N |
- Released on EU publications website:
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