| 讲座简介： | This paper further advances the design of an optimal Financial Stability Fund (Fund) of Abraham et al. (2019) by not having the Fund absorbing all the sovereign debt of a country. The Fund's long-term contracts are subject to two-sided limited enforcement constraints: at any point in time the borrowing country may breach the contract and exit, while the Fund cannot have expected losses. The country's constraint therefore represents a sovereignty constraint, whereas the lenders' constraint can be interpreted as a debt sustainability analysis (DSA). The country can borrow long-term defaultable bonds on the private international market, while having a state-contingent contract with the Fund, which provides insurance and, possibly, credit. The Fund contract has no seniority with respect to the privately held sovereign debt and, therefore, takes this external debt into account. The share of debt held by the Fund might be indeterminate; nevertheless, there is one contract that minimizes the debt absorbed by the Fund. In equilibrium, the Fund contract prevents the country from defaulting on its entire debt position. As a result, the debt in the private international market becomes risk-free, although it is constrained when the Fund's limited enforcement constraint binds. The latter therefore internalizes a pecuniary externality that competitive private lenders usually do not: the fact that marginal lending can result in debt becoming unsustainable. In light of this, our model provides an appealing theoretical and quantitative framework to address sovereign debt-overhang problems and, in doing so, increasing the supply of ‘safe assets’, in the Euro Area and elsewhere. |
