TY  - BOOK
AU  - Dovis,Alessandro
AU  - Golosov,Mikhail
AU  - Shourideh,Ali
ED  - National Bureau of Economic Research.
TI  - Political Economy of Sovereign Debt: A Theory of Cycles of Populism and Austerity 
T2  - NBER working paper series
PY  - 2016///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - January 2016; Hardcopy version available to institutional subscribers
N2  - We study optimal fiscal and redistributive policies in an open economy without commitment. Due to its redistributive motives, the government's incentive to default on its external debt is affected by inequality. We show that in equilibrium the economy endogenously fluctuates between two regimes. In the first regime, the government borrows from abroad, spends generously on transfers and keeps the inequality low. In the second regime, it implements austerity-like policies by cutting transfers, reducing foreign debt and increasing the inequality. The equilibrium dynamics resembles the populist cycles documented in many developing countries
UR  - https://www.nber.org/papers/w21948
UR  - http://dx.doi.org/10.3386/w21948
ER  -