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RECENT DEVELOPMENTS IN QUANTITATIVE MODELS OF SOVEREIGN DEFAULT
Author(s) -
Stähler Nikolai
Publication year - 2013
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.1467-6419.2012.00741.x
Subject(s) - default , sovereign default , dynamic stochastic general equilibrium , economics , insolvency , business cycle , sovereignty , latin americans , macroeconomics , debt , liability , sovereign debt , bankruptcy , finance , political science , monetary policy , law , politics
The current crisis and discussions, in the euro area in particular, show that sovereign debt crises/defaults are no longer confined to developing economies. Following crises in many Latin American countries, the literature on quantitative dynamic macro models of sovereign default has been advancing rapidly. Current debate should take note of the findings of this literature – an extensive overview of which has been provided in this paper. This paper also discusses the inherent difficulties as well as possibilities of integrating this type of model into standard business cycle models (RBC and DSGE models). This is likely to be particularly helpful when using models to analyse upcoming issues in the euro area, such as a suitable sovereign insolvency law or the assumption of joint liability.