Inflation, Debt, and Default in a Monetary Union

November 1, 2000

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Format: Chicago

Samir Jahjah. Inflation, Debt, and Default in a Monetary Union, (USA: International Monetary Fund, 2000) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Depending on the preferences of the central bank, countries in a monetary union tend to accumulate less debt. This reduces the need for fiscal criteria such as debt ceilings. In a monetary union with an independent central bank and a sufficiently large number of relatively small members, investors will begin rationing credit to the government more rapidly, and an equilibrium with no inflation and no default exists. However, highly-indebted countries are more likely to default once they join a monetary union.

Subject: Banking, Bonds, Debt service, Economic integration, External debt, Financial institutions, Inflation, Monetary unions, Price stabilization, Prices

Keywords: Bonds, Budget constraint, Debt service, Default, Government credit, Government default, Government set, Inflation, Loss function, Monetary policy, Monetary union, Monetary unions, Price stabilization, Public debt, Regime switch, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/179
Stock No:

WPIEA1792000
ISBN:

9781451859027
ISSN:

1018-5941

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