{"id":7957,"date":"2019-10-02T15:33:24","date_gmt":"2019-10-02T13:33:24","guid":{"rendered":"https:\/\/www.uni.lu\/fr\/events\/a-theory-of-debt-accumulation-and-deficit-cycles\/"},"modified":"2019-10-02T15:33:24","modified_gmt":"2019-10-02T13:33:24","slug":"a-theory-of-debt-accumulation-and-deficit-cycles","status":"publish","type":"events","link":"https:\/\/www.uni.lu\/fr\/events\/a-theory-of-debt-accumulation-and-deficit-cycles\/","title":{"rendered":"A Theory of Debt Accumulation and Deficit Cycles"},"content":{"rendered":"<section class=\"wp-block-unilux-blocks-free-section section\"><div class=\"container xl:max-w-screen-xl\"><p><strong>Abstract<\/strong><\/p><p><\/p><p><\/p><p>This paper introduces a tractable model of sovereign debt in which governments face intertemporal tradeoffs between (i) preferring more primary deficits to less and (ii) avoiding costly defaults. Governments run deficits when debt and, then, the marginal costs of increasing debt are low. After an extended period of debt accumulation, the probability of default increases, and so do the marginal costs of running debt. Eventually, debt reaches a critical level relative to the size of the economy, a fiscal tipping point, after which debt accumulation stops, with governments cycling between deficits and surpluses, until perhaps a time of default. The main conclusions are that (i) fiscal tipping points typically occur at about 80-90% from default; (ii) the probability of future defaults increases with governments i\u0301myopia, macroeconomic stability, the ease at which defaulted governments re-gain access to capital markets (leading to \u00ab\u00a0serial defaulting\u00a0\u00bb), or debt markets illiquidity; (iii) fiscal austerity may arrive too late: \u201cdebt intolerance\u201d arises around the fiscal tipping point.<\/p><\/div><\/section>","protected":false},"excerpt":{"rendered":"<p>AbstractThis paper introduces a tractable model of sovereign debt in which governments face intertemporal tradeoffs between (i) preferring more primary deficits to less and (ii) avoiding costly defaults. Governments run deficits when debt and, then, the marginal costs of increasing debt are low. After an extended period of debt accumulation, the probability of default increases, and so do the marginal costs of running debt. Eventually, debt reaches a critical level relative to the size of the economy, a fiscal tipping point, after which debt accumulation stops, with governments cycling between deficits and surpluses, until perhaps a time of default. The main conclusions are that (i) fiscal tipping points typically occur at about 80-90% from default; (ii) the probability of future defaults increases with governments i\u0301myopia, macroeconomic stability, the ease at which defaulted governments re-gain access to capital markets (leading to \u00ab\u00a0serial defaulting\u00a0\u00bb), or debt markets illiquidity; (iii) fiscal austerity may arrive too late: \u201cdebt intolerance\u201d arises around the fiscal tipping point.<\/p>\n","protected":false},"author":0,"featured_media":7958,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"closed","template":"","format":"standard","meta":{"featured_image_focal_point":[],"show_featured_caption":false,"ulux_newsletter_groups":"","uluxPostTitle":"","uluxPrePostTitle":"","_trash_the_other_posts":false,"_price":"","_stock":"","_tribe_ticket_header":"","_tribe_default_ticket_provider":"","_tribe_ticket_capacity":"0","_ticket_start_date":"","_ticket_end_date":"","_tribe_ticket_show_description":"","_tribe_ticket_show_not_going":false,"_tribe_ticket_use_global_stock":"","_tribe_ticket_global_stock_level":"","_global_stock_mode":"","_global_stock_cap":"","_tribe_rsvp_for_event":"","_tribe_ticket_going_count":"","_tribe_ticket_not_going_count":"","_tribe_tickets_list":"[]","_tribe_ticket_has_attendee_info_fields":false,"event_start_date":"2019-10-10 12:30:00","event_end_date":"2019-10-10 13:45:00","event_speaker_name":"Antonio Mele \u2013 University of Lugano","event_speaker_link":"","event_is_online":false,"event_location":"JFK Building\r\n29, avenue Kennedy\r\nL-1855 Luxembourg\r\nGround Floor, Nancy-Metz Room","event_street":"","event_location_link":"","event_zip_code":"","event_city":"","event_country":"LU"},"events-topic":[309],"events-type":[],"organisation":[116,101,226],"authorship":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.3 (Yoast SEO v22.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A Theory of Debt Accumulation and Deficit Cycles - Universit\u00e9 du Luxembourg<\/title>\n<meta name=\"description\" content=\"AbstractThis paper introduces a tractable model of sovereign debt in which governments face intertemporal tradeoffs between (i) preferring more primary deficits to less and (ii) avoiding costly defaults. Governments run deficits when debt and, then, the marginal costs of increasing debt are low. After an extended period of debt accumulation, the probability of default increases, and so do the marginal costs of running debt. Eventually, debt reaches a critical level relative to the size of the economy, a fiscal tipping point, after which debt accumulation stops, with governments cycling between deficits and surpluses, until perhaps a time of default. The main conclusions are that (i) fiscal tipping points typically occur at about 80-90% from default; (ii) the probability of future defaults increases with governments i\u0301myopia, macroeconomic stability, the ease at which defaulted governments re-gain access to capital markets (leading to &quot;serial defaulting&quot;), or debt markets illiquidity; (iii) fiscal austerity may arrive too late: \u201cdebt intolerance\u201d arises around the fiscal tipping point.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.uni.lu\/fr\/events\/a-theory-of-debt-accumulation-and-deficit-cycles\/\" \/>\n<meta property=\"og:locale\" content=\"fr_FR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Theory of Debt Accumulation and Deficit Cycles\" \/>\n<meta property=\"og:description\" content=\"AbstractThis paper introduces a tractable model of sovereign debt in which governments face intertemporal tradeoffs between (i) preferring more primary deficits to less and (ii) avoiding costly defaults. Governments run deficits when debt and, then, the marginal costs of increasing debt are low. After an extended period of debt accumulation, the probability of default increases, and so do the marginal costs of running debt. Eventually, debt reaches a critical level relative to the size of the economy, a fiscal tipping point, after which debt accumulation stops, with governments cycling between deficits and surpluses, until perhaps a time of default. The main conclusions are that (i) fiscal tipping points typically occur at about 80-90% from default; (ii) the probability of future defaults increases with governments i\u0301myopia, macroeconomic stability, the ease at which defaulted governments re-gain access to capital markets (leading to &quot;serial defaulting&quot;), or debt markets illiquidity; (iii) fiscal austerity may arrive too late: \u201cdebt intolerance\u201d arises around the fiscal tipping point.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.uni.lu\/fr\/events\/a-theory-of-debt-accumulation-and-deficit-cycles\/\" \/>\n<meta property=\"og:site_name\" content=\"UNI FR\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/uni.lu\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.uni.lu\/wp-content\/uploads\/sites\/11\/2026\/03\/03120045\/UNIV_SM-Profile_1600x1600px-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"2560\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Dur\u00e9e de lecture estim\u00e9e\" \/>\n\t<meta name=\"twitter:data1\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.uni.lu\/fr\/events\/a-theory-of-debt-accumulation-and-deficit-cycles\/\",\"url\":\"https:\/\/www.uni.lu\/fr\/events\/a-theory-of-debt-accumulation-and-deficit-cycles\/\",\"name\":\"A Theory of Debt Accumulation and Deficit Cycles - Universit\u00e9 du Luxembourg\",\"isPartOf\":{\"@id\":\"https:\/\/www.uni.lu\/fr\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.uni.lu\/fr\/events\/a-theory-of-debt-accumulation-and-deficit-cycles\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.uni.lu\/fr\/events\/a-theory-of-debt-accumulation-and-deficit-cycles\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.uni.lu\/wp-content\/uploads\/sites\/11\/2019\/10\/a_theory_of_debt_accumulation_and_deficit_cycles.jpg\",\"datePublished\":\"2019-10-02T13:33:24+00:00\",\"dateModified\":\"2019-10-02T13:33:24+00:00\",\"description\":\"AbstractThis paper introduces a tractable model of sovereign debt in which governments face intertemporal tradeoffs between (i) preferring more primary deficits to less and (ii) avoiding costly defaults. 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