Delivering growth while reducing deficits: lessons from the 1930s
Crafts, Nicolas. Conditions in the 1930s were very similar to those found today: interest rates were already low, the government deficit needed to come down, and the world economy was in disarray. Yet the UK economy grew by almost 20 per cent between 1933 and 1937. This success was built on the government announcing that prices […]
The Problem that Wasn’t: Coordination Failures in Sovereign Debt Restructurings
Bi, Ran, Chamon, Marcos & Zettelmeyer, Jeromin. Contrary to widespread expectation, debt renegotiations in the era of bond finance have generally been quick and involved little litigation. We present a model that rationalizes the initial fears and offers interpretations for why they did not materialize. When the exchange offer is sufficiently attractive vis-à-vis holding out, full participation […]