International Lending, Sovereign Debt and Joint Liability : An Economic Theory Model for Amending the Treaty of Lisbon

• Tác giả: Kaushik Basu
• Ngôn ngữ: eng
• Ký hiệu phân loại: 341.75 International economic law
• Thông tin xuất bản: World Bank, Washington, DC, 2013
• Bộ sưu tập: Tài liệu truy cập mở
• ID: 326927
• Chủ đề: 1. ACCESS TO CREDIT; 2. ACCESS TO MONEY; 3. ADVERSE SELECTION; 4. BANK GUARANTEES; 5. BANK LENDING

Tóm tắt

As the Eurozone crisis drags on, it is evident that a part of the problem lies in the architecture of debt and its liabilities within the Eurozone and, more generally, the European Union. This paper argues that a large part of the problem can be mitigated by permitting appropriately-structured cross-country liability for sovereign debt incurred by individual nations within the European Union. In brief, the paper makes a case for amending the Treaty of Lisbon. The case is established by constructing a game-theoretic model and demonstrating that there exist self-fulfilling equilibria, which would come into existence if cross-country debt liability were permitted and which are Pareto superior to the existing outcome.