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Optimal Sovereign Debt Policy with Private Trading: Explaining Allocation Puzzle

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  • Yena Park

    (University of Rochester)

Abstract

This paper studies optimal sovereign debt policy of the government with limited commitment and compare the optimal policies in economies with and without government's capital control. The comparison of optimal sovereign debt policies can rationalize why more financially open market economies show more severe allocation puzzle -- more negative relationship between growth and public capital flows, which is observed in the data.

Suggested Citation

  • Yena Park, 2015. "Optimal Sovereign Debt Policy with Private Trading: Explaining Allocation Puzzle," 2015 Meeting Papers 1229, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:1229
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    References listed on IDEAS

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