Replication data for: Optimal Sovereign Default

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MAC2014-0093_data			10/12/2019 07:34:PM
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Project Citation:

Adam, Klaus, and Grill, Michael. Replication data for: Optimal Sovereign Default. Nashville, TN: American Economic Association [publisher], 2017. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E114091V1

Project Description

Summary: 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.

Scope of Project

JEL Classification:
      E23 Macroeconomics: Production
      E62 Fiscal Policy
      F41 Open Economy Macroeconomics
      H63 National Debt; Debt Management; Sovereign Debt

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Published Versions

V1 [2019-10-12]

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