Fiscal Policy, Overconsumption and Sovereign Debt Crisis

• 발행기관: 한국재정학회(구 한국재정·공공경제학회)
• 저자명: Yong Jin Kim Chul-In Lee
• 간행물 정보: 『한국재정학회 학술대회 논문집』2011년도 추계학술대회 논문집, 515~548쪽, 전체 34쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2011.10.30

영문 초록

Using an equilibrium framework, we provide predictions that are consistent with the recent experience of sovereign debt crisis in Southern Europe: (ⅰ) generous public spending leads to high consumption, real estate bubbles, and large current account deficit and public debt relative to GDP, and (ⅱ) economies with large fiscal deficits ironically grew fast but became susceptible to a sudden financial and/or fiscal crisis. A surprising aspect of our model is that given the availability of cheap borrowing from EU countries with current account surplus, southern Europe countries with high public deficit can lock into a steady-state Ponzi growth equilibrium with asset bubbles. As long as loan-to-collateral value (LTV) ratio exceeds a certain threshold adopted in the banking sector, households continue to borrow at a lower interest rate of countries with current account surplus than the domestic rate while asset bubbles based on over-consumption can support a constant LTV, establishing a steady-state Ponzi growth equilibrium. When adverse shocks hit the economy and the expected loan-to-collateral value (LTV) ratio rises enough to move the economy into a self-fulfilling crisis region, the steady-state Ponzi growth equilibrium can break down with a bust of asset bubbles, even in the face of a mere psychological pessimism of investors.

목차

Abstract

Ⅰ. Introduction

Ⅱ. The Model

Ⅲ. Self-fulfilling Crisis and Propagation to Other Sectors

Ⅳ. Concluding Remarks

References

키워드

South European sovereign debt crisis over-consumption self-fulfilling crises collateral steady-state Ponzi equilibrium