dc.contributor.author | CORSETTI, Giancarlo | |
dc.contributor.author | MAENG, Seung Hyun | |
dc.date.accessioned | 2023-09-20T09:02:47Z | |
dc.date.available | 2023-09-20T09:02:47Z | |
dc.date.issued | 2023 | |
dc.identifier.issn | 1028-3625 | |
dc.identifier.uri | https://hdl.handle.net/1814/75883 | |
dc.description.abstract | Discretionary governments may choose to default on their liabilities after issuing new debt, creating
intra-period uncertainty that may raise borrowing costs in a self-fulfilling manner. We show that, to
eliminate this disruptive prospect, governments optimally build up reserves to ensure post-auction
repayment in all circumstances. Intra-period risk naturally provides the foundations for a theory of
reserve accumulation. Optimal reserve policy shields the economy from disruptive (off-equilibrium)
risk, substantially containing the costs and size of precautionary debt over-issuance. The model
explains why governments hold large amounts of reserves and appear reluctant to use them facing
fundamental shocks. | en |
dc.format.mimetype | application/pdf | en |
dc.language.iso | en | en |
dc.publisher | European University Institute | en |
dc.relation.ispartofseries | EUI | en |
dc.relation.ispartofseries | RSC | en |
dc.relation.ispartofseries | Working Paper | en |
dc.relation.ispartofseries | 2023/53 | en |
dc.relation.ispartofseries | Pierre Werner Chair Programme | en |
dc.rights | info:eu-repo/semantics/openAccess | en |
dc.rights.uri | http://creativecommons.org/licenses/by/4.0/ | * |
dc.subject | Sovereign default | en |
dc.subject | Foreign reserves | en |
dc.subject | Self-fulfilling crises | en |
dc.subject | Discretionary fiscal policy | en |
dc.subject | Debt sustainability | en |
dc.title | The theory of reserve accumulation, revisited | en |
dc.type | Working Paper | en |
dc.rights.license | Attribution 4.0 International | * |