TY  - BOOK
AU  - Bianchi,Javier
AU  - Mondragon,Jorge
ED  - National Bureau of Economic Research.
TI  - Monetary Independence and Rollover Crises
T2  - NBER working paper series
PY  - 2018///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - December 2018; Hardcopy version available to institutional subscribers
N2  - This paper shows that the inability to use monetary policy for macroeconomic stabilization leaves a government more vulnerable to a rollover crisis. We study a sovereign default model with self-fulfilling rollover crises, foreign currency debt, and nominal rigidities. When the government lacks monetary independence, lenders anticipate that the government would face a severe recession in the event of a liquidity crisis, and are therefore more prone to run on government bonds. In a quantitative application, we find that the lack of monetary autonomy played a central role in making Spain vulnerable to a rollover crisis during 2011-2012. Finally, we argue that a lender of last resort can go a long way towards reducing the costs of giving up monetary independence
UR  - https://www.nber.org/papers/w25340
UR  - http://dx.doi.org/10.3386/w25340
ER  -