scholarly journals Optimal Sovereign Default

2017 ◽  
Vol 9 (1) ◽  
pp. 128-164 ◽  
Author(s):  
Klaus Adam ◽  
Michael Grill
Keyword(s):  
Quantitative Analysis ◽  
Open Economy ◽  
Small Open Economy ◽  
Government Debt ◽  
Sovereign Default ◽  
Production Risk ◽  
Domestic Production ◽  
Ex Post ◽  
Ex Ante ◽  
The One

When is it optimal for a fully committed government to default on its legal repayment obligations? Considering a small open economy with domestic production risk and noncontingent government debt, we show that it is ex ante optimal to occasionally deviate from the legal repayment obligation and to repay debt only partially. This holds true even if default generates significant deadweight costs ex post. A quantitative analysis reveals that default is optimal only in response to persistent disaster-like shocks to domestic output. Applying the framework to the situation in Greece, we find that optimal default policies suggest a considerably larger and more timely default than the one actually implemented in the year 2012. (JEL E23, E62, F41, H63)

Trade Tax Reform in a Small Open Economy with Distributional Objectives and Distortionary Taxation

2002 ◽  
Vol 1 (1) ◽  
Author(s):  
Jeremy Edwards
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Small Open Economies ◽  
Tax Reforms ◽  
Distortionary Taxation ◽  
Nontraded Goods ◽  
Traded Goods ◽  
Consumer Prices ◽  
Distortionary Taxes ◽  
The One

Abstract The paper shows that, if two conditions are satisfied, both radial contraction and concertina trade tax reforms continue to be desirable in a small open economy that differs from the one usually considered by having distributional objectives and using distortionary taxes to raise revenue. The first condition is that some optimisation in the choice of commodity taxes takes place - at a minimum, taxes on nontraded goods must be optimally chosen while taxes on traded goods keep the consumer prices of such goods constant. The second is that pure profits are absent from every household's budget constraint. These conditions mean that some care is required in arguing the case for simple trade tax reforms in small open economies.

The New Old Efficiency Theories of Causation and Liability

2014 ◽  
Vol 7 (1-2) ◽  
Author(s):  
Richard W. Wright
Keyword(s):  
Social Welfare ◽  
Fundamental Problem ◽  
Tort Law ◽  
Tort Liability ◽  
Liability Rule ◽  
Actual Causation ◽  
Ex Post ◽  
Ex Ante ◽  
The One ◽  
Ex Post Analysis

AbstractFor the last 40 years, efficiency theorists have attempted to demonstrate that tort liability in general and negligence liability in particular can best/only be explained by the hypothesis that judges are trying to maximize aggregate social welfare. Thirty years ago I published a pair of articles criticizing these attempts, noting especially the efficiency theorists’ inability to explain and justify the factual causation requirement in tort law. Nevertheless, the efficiency theorists have continued to make the same arguments. In this paper, I canvass the old arguments and their current restatements, including the attempts by some of the leading theorists to equate ex post analysis of actual causation with ex ante analysis of negligent conduct and attempts by others to explain the actual negligence liability rules. None of the rules proposed by the efficiency theorists is consistent with the practice of the courts, and none of them would promote efficient deterrence. Worse yet, the least descriptively plausible negligence liability rule proposed by the efficiency theorists is the one likely to be the least inefficient in actual practice, while the one assumed by most efficiency theorists will be the most inefficient. The fundamental problem with the efficiency theories is that they assume that the focus of law should be and is on the maximization of aggregate social welfare, rather than justice – the promotion of everyone’s equal external freedom in their interactions with others.

A COMPARATIVE STUDY OF EXCHANGE RATE REGIMES AND MACRO-INSTABILITIES IN THE TWIN ECONOMIES OF SINGAPORE AND HONG KONG

2007 ◽  
Vol 52 (01) ◽  
pp. 93-116 ◽  
Author(s):  
YUE MA ◽  
Y. Y. KUEH ◽  
RAYMOND C. W. NG
Keyword(s):  
Hong Kong ◽  
Exchange Rate ◽  
Open Economy ◽  
Exchange Rate Regime ◽  
Small Open Economy ◽  
Prototype Model ◽  
Internal Factors ◽  
Monetary Authorities ◽  
The Stability ◽  
The One

Based on a small, open-economy IS-LM prototype model, this paper examines the sources of macroeconomic instabilities in Hong Kong and Singapore operating under two different currency board arrangements. The empirical findings suggest that in general, both external and internal factors contribute to the macroeconomic volatilities observed in the two economies. There is evidence of a tradeoff between exchange rate and interest rate targeting for the stability of money supply in Singapore. Our findings have important implications for Mainland China's monetary authorities in the transition from a hard-peg exchange rate regime like Hong Kong to a basket-link system like the one in Singapore.

scholarly journals Overborrowing and Systemic Externalities in the Business Cycle

2011 ◽  
Vol 101 (7) ◽  
pp. 3400-3426 ◽  
Author(s):  
Javier Bianchi
Keyword(s):  
Quantitative Analysis ◽  
Open Economy ◽  
Financial Crises ◽  
Credit Constraints ◽  
Small Open Economy ◽  
Dynamic Stochastic General Equilibrium ◽  
Constrained Efficiency ◽  
Dynamic Stochastic ◽  
The Business Cycle ◽  
The Cost

Credit constraints linking debt to market-determined prices embody a systemic credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. This externality arises because private agents fail to internalize the financial amplification effects of carrying a large amount of debt when credit constraints bind. We conduct a quantitative analysis of this externality in a two-sector dynamic stochastic general equilibrium (DSGE) model of a small open economy calibrated to emerging markets. Raising the cost of borrowing during tranquil times restores constrained efficiency and significantly reduces the incidence and severity of financial crises. JEL: E13, E32, E44, F41, G01

scholarly journals The dynamic impact of external shocks on fiscal reaction function in a small open economy

2020 ◽  
Vol 9 (2) ◽  
pp. 84
Author(s):  
Chee Loong Lee
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Structural Var ◽  
Var Model ◽  
Reaction Function ◽  
External Shocks ◽  
Dynamic Impact ◽  
Budgetary Policy ◽  
Fiscal Reaction Function ◽  
The One

Fiscal authorities in a small open economy should utilize its fiscal instrument feedback to external shocks. This paper analyzes the dynamic respond of budgetary policy to external shocks in Malaysia by a Structural VAR model. On the one hand, the results confirm that external shocks have a significant effect on fiscal reaction function variables. On the other hand, the direct consideration of budgetary reaction of Malaysia to external shocks is limited. Therefore, fiscal authorities should enhance its feedback to external shocks to achieve stable and sustain growth.

scholarly journals The Contested Council: Conflict Dimensions of an Intergovernmental EU Institution

2005 ◽  
Vol 53 (2) ◽  
pp. 403-422 ◽  
Author(s):  
Christina Zimmer ◽  
Gerald Schneider ◽  
Michael Dobbins
Keyword(s):  
European Union ◽  
Quantitative Analysis ◽  
Correspondence Analysis ◽  
Empirical Investigation ◽  
The Political ◽  
The European Union ◽  
Political Space ◽  
Ex Post ◽  
Ex Ante ◽  
Council Of Ministers

Recent research has tried to uncover the political space in which the Council of Ministers of the European Union decides. Rather than the left-right conflict or a cleavage between governments with national and supranational attitudes, this article shows that a redistributive dimension, decisively shapes the interactions in this most important legislative body of the European Union. In contrast to extant studies, we employ ex ante rather than ex post preference data and rely on correspondence analysis as a means to identify the underlying dimensions of contestation. The article concludes with an empirical investigation of how enlargement will affect the emerging political space within the European Union. Our quantitative analysis suggests that the gulf between net-contributors and net-receivers will further deepen.

Sign in / Sign up

Export Citation Format

Share Document