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dc.contributor.authorCORSETTI, Giancarlo
dc.contributor.authorMAENG, Seung Hyun
dc.date.accessioned2023-09-20T09:02:47Z
dc.date.available2023-09-20T09:02:47Z
dc.date.issued2023
dc.identifier.issn1028-3625
dc.identifier.urihttps://hdl.handle.net/1814/75883
dc.description.abstractDiscretionary 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.mimetypeapplication/pdfen
dc.language.isoenen
dc.publisherEuropean University Instituteen
dc.relation.ispartofseriesEUIen
dc.relation.ispartofseriesRSCen
dc.relation.ispartofseriesWorking Paperen
dc.relation.ispartofseries2023/53en
dc.relation.ispartofseriesPierre Werner Chair Programmeen
dc.rightsinfo:eu-repo/semantics/openAccessen
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/*
dc.subjectSovereign defaulten
dc.subjectForeign reservesen
dc.subjectSelf-fulfilling crisesen
dc.subjectDiscretionary fiscal policyen
dc.subjectDebt sustainabilityen
dc.titleThe theory of reserve accumulation, revisiteden
dc.typeWorking Paperen
dc.rights.licenseAttribution 4.0 International*


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Attribution 4.0 International
Except where otherwise noted, this item's license is described as Attribution 4.0 International