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L'insoutenable dynamique de la dette. Une analyse macroéconomique du défaut souverain

Author

Listed:
  • Michel Guillard

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

  • Hubert Kempf

    (ENS Cachan - École normale supérieure - Cachan, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

The macroeconomic sustainability of public debt is addressed when the interaction between fiscal and monetary policies is taken into account, as well as the possibility of default. Taking into account a rule of default, we distinguish the "default threshold" from the "unsustainability threshold". The former one corresponds to the upper limit to public debt ; the latter one to the level above which, absent any further shock, the dynamics of public debt leads to future default. When this threshold is exceeded, the risk premium is high enough so as to generate future default, which itself feeds the risk premium. When a default occurs, the haircut applied on the existing amount of debt depends on the default rule. We show that a "successful default" is such that the ex post debt level is sustainable, which means that the ex post default risk premium is small enough and thus leads to a decreasing debt to GDP ratio. This implies that the haircut on public debt must be high enough.

Suggested Citation

  • Michel Guillard & Hubert Kempf, 2012. "L'insoutenable dynamique de la dette. Une analyse macroéconomique du défaut souverain," Post-Print hal-00821566, HAL.
    • Handle: RePEc:hal:journl:hal-00821566
    DOI: 10.3917/redp.226.0921
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    Cited by:

    1. Sokolova, Anna, 2015. "Fiscal limits and monetary policy: default vs. inflation," Economic Modelling, Elsevier, vol. 48(C), pages 189-198.

    More about this item

    Keywords

    Risque de défaut; Soutenabilité; Dette publique; Défaut souverain; Public debt; default risk; sustainability;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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