dc.contributor.author | Aguiar, Mark | |
dc.contributor.author | Amador, Manuel | |
dc.contributor.author | Gopinath, Gita | |
dc.date.accessioned | 2014-03-24T20:20:08Z | |
dc.date.issued | 2008 | |
dc.identifier.citation | Aguiar, Mark, Manuel Amador, and Gita Gopinath. 2008. Investment cycles and sovereign debt overhang. Review of Economic Studies 76(1): 1-31. | en_US |
dc.identifier.issn | 0034-6527 | en_US |
dc.identifier.uri | http://nrs.harvard.edu/urn-3:HUL.InstRepos:11988004 | |
dc.description.abstract | We characterize optimal taxation of foreign capital and optimal sovereign debt policy in a small open economy where the government cannot commit to policy, seeks to insure a risk averse domestic constituency, and is more impatient than the market. Optimal policy generates long-run cycles in both sovereign debt and foreign direct investment in an environment in which the first best capital stock is a constant. The expected tax on capital endogenously varies with the state of the economy and in- vestment is distorted by more in recessions than in booms amplifying the effect of shocks. The government’s lack of commitment induces a negative correlation between investment and the stock of government debt, a "debt overhang" effect. Debt relief is never Pareto improving and cannot affect the long-run level of investment. Further, restricting the government to a balanced budget can eliminate the cyclical distortion of investment. | en_US |
dc.description.sponsorship | Economics | en_US |
dc.language.iso | en_US | en_US |
dc.publisher | The Review of Economic Studies | en_US |
dc.relation.isversionof | http://dx.doi.org/10.1111/j.1467-937X.2008.00523.x | en_US |
dash.license | LAA | |
dc.title | Investment Cycles and Sovereign Debt Overhang | en_US |
dc.type | Journal Article | en_US |
dc.description.version | Accepted Manuscript | en_US |
dc.relation.journal | Review of Economic Studies | en_US |
dash.depositing.author | Gopinath, Gita | |
dc.date.available | 2014-03-24T20:20:08Z | |
dc.identifier.doi | 10.1111/j.1467-937X.2008.00523.x | * |
dash.contributor.affiliated | Gopinath, Gita | |