External and Public Debt Crises

60 Pages Posted: 15 Jul 2015

See all articles by Cristina Arellano

Cristina Arellano

Federal Reserve Bank of Minneapolis

Andrew Atkeson

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Mark L. J. Wright

Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Multiple version iconThere are 2 versions of this paper

Date Written: July 2, 2015

Abstract

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.

Keywords: Sovereign Debt, Public Debt, External Debt, Sovereign Default

JEL Classification: F34, F45, E62

Suggested Citation

Arellano, Cristina and Atkeson, Andrew G. and Wright, Mark L.J., External and Public Debt Crises (July 2, 2015). FRB of Chicago Working Paper No. 2015-05. Available at SSRN: https://ssrn.com/abstract=2630640 or http://dx.doi.org/10.2139/ssrn.2630640

Cristina Arellano

Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

Andrew G. Atkeson

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mark L.J. Wright (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

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