The Reluctant Defaulter: A Tale of High Government Debt

41 Pages Posted: 10 Jan 2018

See all articles by Michel A. Habib

Michel A. Habib

University of Zurich; Swiss Finance Institute

Fabrice Collard

University of Berne - Department of Economics

Jean-Charles Rochet

Swiss Finance Institute; University of Geneva - Geneva Finance Research Institute (GFRI); University of Zurich - Swiss Banking Institute (ISB)

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2016

Abstract

We seek to account for the very high levels of public debt recently reached in many OECD countries. We do so by assuming that governments do their utmost to stave off default, which occurs only when a government fails to muster the funds needed for debt service. This distinguishes our work from existing work on sovereign debt, which has assumed that governments weigh the costs of debt service against those of default. The debt ratios we compute are quite close to prevailing levels: our baseline case has debt-to-GDP ratio slightly above 80%.

Suggested Citation

Habib, Michel A. and Collard, Fabrice and Rochet, Jean-Charles, The Reluctant Defaulter: A Tale of High Government Debt (May 1, 2016). Swiss Finance Institute Research Paper No. 17-39, Available at SSRN: https://ssrn.com/abstract=3098748 or http://dx.doi.org/10.2139/ssrn.3098748

Michel A. Habib

University of Zurich ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland
41-44-634-2507 (Phone)
41-44-634-4903 (Fax)

HOME PAGE: http://www.isb.uzh.ch/institut/profs/mhabib.htm

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Fabrice Collard

University of Berne - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

HOME PAGE: http://fabcol.free.fr

Jean-Charles Rochet (Contact Author)

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

University of Zurich - Swiss Banking Institute (ISB) ( email )

Plattenstrasse 14
CH-8032 Zurich, Zurich 8032
Switzerland

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