International Lending, Sovereign Debt and Joint Liability An Economic Theory Model for Amending the Treaty of Lisbon
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...
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| Format: | eBook |
| Language: | English |
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Washington, D.C
The World Bank
2013
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| Collection: | World Bank E-Library Archive - Collection details see MPG.ReNa |
| Summary: | 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 |
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| Physical Description: | 31 p |