scholarly journals Self-Fulfilling Debt Dilution: Maturity and Multiplicity in Debt Models

2020 ◽  
Vol 110 (9) ◽  
pp. 2783-2818 ◽  
Author(s):  
Mark Aguiar ◽  
Manuel Amador
Keyword(s):  
Sovereign Debt ◽  
Multiple Equilibria ◽  
Necessary Conditions ◽  
The Self ◽  
Policy Implications ◽  
Third Party ◽  
Lender Of Last Resort ◽  
Debt Accumulation ◽  
Crucial Component ◽  
The Government

We establish that creditor beliefs regarding future borrowing can be self-fulfilling, leading to multiple equilibria with markedly different debt accumulation patterns. We characterize such indeterminacy in the Eaton-Gersovitz sovereign debt model augmented with long maturity bonds. Two necessary conditions for the multiplicity are (i) the government is more impatient than foreign creditors, and (ii) there are deadweight losses from default. The multiplicity is dynamic and stems from the self-fulfilling beliefs of how future creditors will price bonds; long maturity bonds are therefore a crucial component of the multiplicity. We introduce a third party with deep pockets to discuss the policy implications of this source of multiplicity and identify the potentially perverse consequences of traditional “lender of last resort” policies. (JEL E44, E62, F34, H63, G12)

Solidarity and Responsibility in the Euro Area: Foes or Friends?

2018 ◽  
Vol 15 (1) ◽  
Author(s):  
Andrea Fracasso
Keyword(s):  
Risk Reduction ◽  
Euro Area ◽  
Sovereign Debt ◽  
Risk Sharing ◽  
Multiple Equilibria ◽  
Lender Of Last Resort ◽  
Short Article ◽  
Viable Solution ◽  
Correct Sequence ◽  
Default Risks

Abstract The recent debate on the reform of the economic governance in the euro area has been marred by a stark disagreement on the correct sequence between risk-reduction (responsibility) and risk-sharing (solidarity). In fact, the dichotomy between risk-reduction and risk-sharing may be fallacious as they reinforce each other, particularly in a monetary union with no lender of last resort for the public sector and no common macroeconomic stabilization mechanisms. The lack of risk-sharing mechanisms is per se a major source of redenomination and default risks and thus it makes the euro area prone to financial market segmentation along national borders and ultimately weaker. At the same time, greater structural convergence has to be achieved through structural reforms and fiscal prudence in order to reduce the likelihood of future negative idiosyncratic shocks in currently vulnerable countries. Notwithstanding some progress towards a politically viable solution encompassing both responsibility and solidarity, a number of important issues remain controversial. This short article summarizes the debate and introduces some of these controversial issues, ranging from the correct role of market discipline when markets are prone to self-fulfilling prophecies and multiple equilibria, to the (dis)advantages of sovereign debt restructuring mechanisms based on rules rather than discretion, from the pros and cons of new safe assets in the euro area to the primacy of coping with debt legacy problems, and the like.

scholarly journals Stochastically Assessing the Financial Sustainability of Individual Accounts in the Urban Enterprise Employees’ Pension Plan in China

2019 ◽  
Vol 11 (13) ◽  
pp. 3568 ◽  
Author(s):  
Xiaohua Chen ◽  
Zaigui Yang
Keyword(s):  
Pension Plan ◽  
The Self ◽  
Policy Implications ◽  
Financial Sustainability ◽  
Depth Analysis ◽  
The Government ◽  
The Individual ◽  
The Impact ◽  
Individual Accounts

Various countries are paying increasing attention to the long-term financial sustainability of pension plans, and the self-balancing ability of such plans is an important index to measure their long-term financial sustainability. This paper explores the financial self-balancing ability of the individual accounts of China’s urban enterprise employees’ pension plan (UEEPPI). In the particularly serious scenario that the individual accounts’ previous accumulated funds are zero, the bookkeeping rate and the investment return rate are considered as stochastic variables in the in-depth analysis of the self-balancing ability of individual accounts, and the effects of two different bookkeeping behaviors are compared. The results indicate that if the government adopts the fixed bookkeeping rate, the individual accounts have an excellent self-balancing ability. If the government adopts a stochastic bookkeeping rate, it can further improve the self-balancing ability of individual accounts. Sensitivity analysis finds that the increase in the wage growth rate can improve the self-balancing ability of individual accounts, but the impact of contribution rate of individual accounts and the contribution wages of recruits create uncertainty. Based on the conclusions, some policy implications are proposed.

scholarly journals Meeting the world’s demand for safe assets? Macroeconomic policy and the international status of the euro after the crisis

2017 ◽  
Vol 25 (1) ◽  
pp. 30-60 ◽  
Author(s):  
Mattias Vermeiren
Keyword(s):  
Sovereign Debt ◽  
World Economy ◽  
International Political Economy ◽  
Macroeconomic Policy ◽  
Fiscal Policies ◽  
Lender Of Last Resort ◽  
International Currency ◽  
European Central ◽  
The World ◽  
The Government

In this article, I engage with the chartalist literature to explore the political foundations of international currencies. Drawing on this literature as well as on recent scholarship on the shortage of safe assets in the world economy, I challenge a prevailing premise of the International Political Economy literature that international currency status needs to be based on conservative macroeconomic policy institutions and practices, which is deemed necessary to maintain foreign confidence in the stability of the real value of the international currency. I contend that international currency status in the post-crisis world economy hinges on the willingness and capacity of the currency provider to adopt accommodating monetary and fiscal policies. First, the central bank needs to offer a backstop to the market for sovereign debt securities by acting as a lender of last resort to the government, whereas fiscal policy expansion is necessary to sufficiently expand the stock of the only securities that can assume the function of genuinely safe assets: sovereign debt. Second, expansionary monetary and fiscal policies enable the international currency issuer to supply safe assets to the rest of the world by running deficits on its trade balance. This article analyses how the European Central Bank’s monetary policy decisions in the wake of the crisis ran against these two prerequisites, constraining the Eurozone to become a large net provider of safe assets in the world economy. By linking these decisions to the creditor and export interests of the Northern Eurozone countries, it disputes the European Central Bank’s ‘neutral stance’ regarding the internationalization of the euro.

Collective memory in law and policy: the problem of the sovereign debt crisis

Legal Studies ◽  
2012 ◽  
Vol 32 (4) ◽  
pp. 642-660 ◽  
Author(s):  
Patrick O'Callaghan
Keyword(s):  
Collective Memory ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Historical Narrative ◽  
Policy Response ◽  
Sovereign Debt Crisis ◽  
Lender Of Last Resort ◽  
Policy Makers ◽  
Law And Policy ◽  
The Government

The idea of ‘collective memory’ features prominently in several disciplines but rarely in legal scholarship. Drawing on the work of Henri Bergson, Maurice Halbwachs and GWF Hegel, this paper seeks to present an account of collective memory that is relevant to discourse on law and policy. The paper uses the example of the policy response to the European sovereign debt crisis as a means of illustrating how collective memory of events in the distant past can shape individual behaviour and thinking. It argues that the current policy response can be explained, at least in part, by the influence on policy makers of the standard historical narrative of the Great Inflation of Weimar Germany. When, however, collective memory takes the form of Bergsonian ‘habit memory’, it can inhibit our efforts to resolve hard cases and the German government's opposition to the European Central Bank acting as a lender of last resort in the government bond markets neatly illustrates this point. If the debt crisis is to be managed effectively, policy makers must draw on Bergsonian ‘pure memory’ to explore the bounds of political and economic possibility.

The Problem of Agricultural Taxation in West Pakistan and an Alternative Solution: A Comment (Notes & Comments)

1973 ◽  
Vol 12 (4) ◽  
pp. 433-437
Author(s):  
Sarfaraz Khan Qureshi
Keyword(s):  
Capita Income ◽  
Agricultural Sector ◽  
Central Government ◽  
Policy Implications ◽  
Farm Size ◽  
Per Capita Income ◽  
Tax Rate ◽  
Water Rate ◽  
Per Capita ◽  
The Government

In the Summer 1973 issue of the Pakistan Development Review, Mr. Mohammad Ghaffar Chaudhry [1] has dealt with two very important issues relating to the intersectoral tax equity and the intrasectoral tax equity within the agricultural sector in Pakistan. Using a simple criterion for vertical tax equity that implies that the tax rate rises with per capita income such that the ratio of revenue to income rises at the same percentage rate as per capita income, Mr. Chaudhry found that the agricultural sector is overtaxed in Pakistan. Mr. Chaudhry further found that the land tax is a regressive levy with respect to the farm size. Both findings, if valid, have important policy implications. In this note we argue that the validity of the findings on intersectoral tax equity depends on the treatment of water rate as tax rather than the price of a service provided by the Government and on the shifting assumptions regard¬ing the indirect taxes on imports and domestic production levied by the Central Government. The relevance of the findings on the intrasectoral tax burden would have been more obvious if the tax liability was related to income from land per capita.

scholarly journals What Is Orientation in Dignitarian Thinking? Self, Other, Time and Space

2020 ◽  
pp. 174387212098228
Author(s):  
Stephen Riley
Keyword(s):  
The Self ◽  
The Other ◽  
Core Area ◽  
Methodological Challenge ◽  
Time And Space ◽  
Normative Discourse ◽  
The Government

Drawing upon Kant’s analysis of the role of intuitions in our orientation towards knowledge, this paper analyses four points of departure in thinking about dignity: self, other, time and space. Each reveals a core area of normative discourse – authenticity in the self, respect for the other, progress through time and authority as the government of space – along with related grounds of resistance to dignity. The paper concludes with a discussion of the methodological challenge presented by our different dignitarian intuitions, in particular the role of universality in testing and cohering our intuitions.

School Catchment Zone Mergers and Housing Wealth Redistribution

2021 ◽  
pp. 0739456X2110067
Author(s):  
Siu Kei Wong ◽  
Kuang Kuang Deng
Keyword(s):  
School Quality ◽  
Housing Prices ◽  
Estimation Method ◽  
Policy Implications ◽  
Housing Wealth ◽  
Housing Values ◽  
Wealth Redistribution ◽  
The Government ◽  
Empirical Design

This study investigates how perceived school quality affects housing values, using a new estimation method. Our empirical design takes advantage of the mergers of school catchment zones initiated by the government to develop quasi-experiments. We find that, in zones that gained sudden access to higher ranked schools, housing prices increased by 1.3 to 4.1 percent. Larger and more expensive houses appreciated more in response to the improvement in perceived quality of available schools. The findings generate important policy implications regarding housing wealth redistribution and housing expenditures among different households. The study also enriches the literature on the capitalization effect of school quality.

Suturing the Open Veins of Ecuador: Debt, Default and Democracy

2009 ◽  
Vol 2 (1) ◽  
Author(s):  
Wade Mansell ◽  
Karen Openshaw
Keyword(s):  
Economic History ◽  
Sovereign Debt ◽  
Legal Aspects ◽  
Debt Burden ◽  
Legal Implications ◽  
Audit Commission ◽  
Obvious Benefit ◽  
The Government ◽  
Large Discount ◽  
Interest Payments

In 2008 the Ecuadorian government received a report on the legitimacy of the country's sovereign debt from an international audit commission appointed by Ecuador's current president, Rafael Correa. This concluded that much of the debt was tainted by illegality and illegitimacy and consequently did not merit repayment. Citing the report's findings as justification, the government stopped making interest payments on certain of the country's bonds, but, rather than repudiating them altogether, engineered a successful buyback at a large discount. Having thus reduced Ecuador's external commercial debt burden by about a third, the government is now planning to address multilateral and bilateral loans also adjudged unlawful by the commission.This article examines the robust approach adopted by the Correa administration to tackling Ecuador's public debts, placing it in the context of the country's troubled economic history and contrasting it with previous defaults and debt workouts which largely worked to Ecuador's disadvantage. In doing so, it considers the use which the government has made of the increasingly prominent concepts of odious and illegitimate debt as a means of combating the indebtedness of the South. The conclusion reached is that, regardless of the final position suggested by international law, the realities of international relations are likely to limit the practicality of legal remedies. Nevertheless, the case of Ecuador provides a new chapter in the continuing academic debate regarding unlawful debt.These, of course, are the legal aspects of Ecuador's endeavours to curtail expenditure desperately needed for other purposes. Underlying the legal implications is the reality of an impoverished nation called upon to continue to service or redeem 'debt' that brought no obvious benefit to the overwhelming majority of its people. Debt repayment has promoted impoverishment and also, if indirectly, facilitated devastating environmental degradation.

Self-employed surfers, universal credit and the minimally decent life

Legal Studies ◽  
2021 ◽  
pp. 1-18
Author(s):  
Christopher Rowe
Keyword(s):  
Social Security ◽  
Low Income ◽  
Judicial Review ◽  
The Self ◽  
Tax Credits ◽  
Minimum Income ◽  
Wage Labour ◽  
The Social ◽  
Decent Life ◽  
The Government

Abstract As part of its response to Covid-19 the government paused the use of the ‘Minimum Income Floor’ (MIF), which restricts the Universal Credit (UC) entitlement of the self-employed. This paper places the MIF in the wider context of conditionality in the social security system and considers a judicial review which claimed that the MIF was discriminatory. The paper focuses on how UC affects the availability of real choices for low-income citizens to limit or escape from wage labour, with two implications of the move to UC highlighted. First, the overlooked labour decommodifying aspect of tax credits, which provided a minimum income guarantee and a genuine alternative to wage labour for people who self-designated as ‘self-employed’, even if their earnings were minimal or non-existent, has been removed. Secondly, UC has in some respects improved the position of low-paid wage labourers in ‘mini-jobs’, who are not subject to conditionality once they work for the equivalent of approximately nine hours a week on the minimum wage.

Coping with Spatial Mismatch: Subsidy Design for Electric Vehicle and Charging Markets

2021 ◽  
Author(s):  
Wei Zhang ◽  
Yifan Dou
Keyword(s):  
Electric Vehicle ◽  
Service Providers ◽  
Supply And Demand ◽  
Problem Definition ◽  
Environmental Benefits ◽  
Third Party ◽  
Theoretic Model ◽  
Spatial Mismatch ◽  
The Government ◽  
Ev Charging

Problem definition: We study how the government should design the subsidy policy to promote electric vehicle (EV) adoptions effectively and efficiently when there might be a spatial mismatch between the supply and demand of charging piles. Academic/practical relevance: EV charging infrastructures are often built by third-party service providers (SPs). However, profit-maximizing SPs might prefer to locate the charging piles in the suburbs versus downtown because of lower costs although most EV drivers prefer to charge their EVs downtown given their commuting patterns and the convenience of charging in downtown areas. This conflict of spatial preferences between SPs and EV drivers results in high overall costs for EV charging and weak EV adoptions. Methodology: We use a stylized game-theoretic model and compare three types of subsidy policies: (i) subsidizing EV purchases, (ii) subsidizing SPs based on pile usage, and (iii) subsidizing SPs based on pile numbers. Results: Subsidizing EV purchases is effective in promoting EV adoptions but not in alleviating the spatial mismatch. In contrast, subsidizing SPs can be more effective in addressing the spatial mismatch and promoting EV adoptions, but uniformly subsidizing pile installation can exacerbate the spatial mismatch and backfire. In different situations, each policy can emerge as the best, and the rule to determine which side (SPs versus EV buyers) to subsidize largely depends on cost factors in the charging market rather than the EV price or the environmental benefits. Managerial implications: A “jigsaw-piece rule” is recommended to guide policy design: subsidizing SPs is preferred if charging is too costly or time consuming, and subsidizing EV purchases is preferred if charging is sufficiently fast and easy. Given charging costs that are neither too low nor too high, subsidizing SPs is preferred only if pile building downtown is moderately more expensive than pile building in the suburbs.

Sign in / Sign up

Export Citation Format

Share Document