NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

External and Public Debt Crises

Cristina Arellano, Andrew Atkeson, Mark Wright

NBER Working Paper No. 21456
Issued in August 2015
NBER Program(s):EFG, IFM, PE

The recent debt crises in Europe and the U.S. states feature similar sharp increases in spreads on government debt but also show important differences. In Europe, the crisis occurred at high government indebtedness levels and had spillovers to the private sector. In the United States, state government indebtedness was low, and the crisis had no spillovers to the private sector. We show theoretically and empirically that these different debt experiences result from the interplay between differences in the ability of governments to interfere in private external debt contracts and differences in the flexibility of state fiscal institutions.

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Document Object Identifier (DOI): 10.3386/w21456

Published: External and Public Debt Crises, Cristina Arellano, Andrew Atkeson, Mark Wright. in NBER Macroeconomics Annual 2015, Volume 30, Eichenbaum and Parker. 2016

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