Authors:

  • Gita Gopinath

Excerpt

Crisis and Commitment: Inflation Credibility and the Vulnerability to Sovereign Debt Crises. Gita Gopinath, June 21, 2013, Paper. "We explore the role of inflation credibility in self-fulfilling debt crises. In particular, we propose a continuous time model of nominal debt with the potential for self-fulfilling debt crises as in Calvo (1988) and Cole and Kehoe (2000). We characterize crisis equilibria conditional on the level of commitment to low inflation. With strong commitment, which can be interpreted as joining a monetary union or issuing foreign currency debt, the environment is a version of the one studied by Cole and Kehoe..." Link verified June 19, 2014