Dallal Bendjellal, Suzanna Khalifa
Océane Piétri: oceane.pietri[at]univ-amu.fr
Morgan Raux: morgan.raux[at]univ-amu.fr
Laura Sénécal: laura.senecal[at]univ-amu.fr
Sovereign risk, financial fragility and fiscal policy
The paper analyzes the optimized response of debt maturity and public spending to a sovereign debt crisis in which sovereign risk and bank stability are intertwined. In my model, a rise in sovereign risk leads to a credit crunch and gives rise to a feedback loop between bank distress, distortionary taxes and sovereign default risk. I find that reducing public spending and bonds maturity in response to the debt crisis leads to lower welfare losses because debt rises less and the feedback loop is dampened. When only lump sum taxes are used to finance public debt, the latter becomes less costly and the response of both policy instruments is characterized by an increase in order to reduce the welfare losses.
Marriage payments and women’s violence acceptance in Jordan