Is It Too Late to Bail Out the Troubled Countries in the Eurozone?

Juan Carlos Conesa and Timothy Kehoe

American Economic Review, 2014, vol. 104, issue 5, 88-93

Abstract: In January 1995, US President Bill Clinton organized a bailout for Mexico that imposed penalty interest rates and induced the Mexican government to reduce its debt, ending the debt crisis. Can the Troika (European Commission, European Central Bank, and International Monetary Fund) organize similar bailouts for the troubled countries in the eurozone? Our analysis suggests that debt levels are so high that bailouts with penalty interest rates could induce the eurozone governments to default rather than reduce their debt. A resumption of economic growth is one of the few ways that the eurozone crises can end.

JEL-codes: F33 H63 O47 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.5.88
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Citations: View citations in EconPapers (38)

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Working Paper: Is It Too Late to Bail Out the Troubled Countries in the Eurozone? (2014)
Working Paper: Is It Too Late to Bail Out the Troubled Countries in the Eurozone? (2014)
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