What determines debt intolerance? The role of political and monetary institutions

Raffaela Giordano () and Pietro Tommasino

European Journal of Political Economy, 2011, vol. 27, issue 3, 471-484

Abstract: Why do some States default on their debt more often than others? We argue that sovereign default is the outcome of a political struggle among different groups of citizens. It is less likely to happen if domestic debt-holders are politically strong and/or the costs of the financial turmoil typically triggered by a sovereign bankruptcy are large. We show that these conditions are in turn more likely to be present if a country has a strong middle class and/or a sufficiently independent central bank.

Keywords: Fiscal; sustainability; Political; economy; Financial; crises; Central; bank; independence (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (19)

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Working Paper: What determines debt intolerance? The role of political and monetary institutions (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:27:y:2011:i:3:p:471-484

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