Research seminar on June, 25: Mark Aguiar (Princeton University)

Topic: Self-Ful€ling Debt Dilution: Maturity and Multiplicity in Debt Models
Date & Time: June, 25 at 16.50
Place: 3A Kantemirovskaya st., room 339

International Laboratory of Game Theory and Decision Making  invites you to participate in a research seminar.
On June, 25, Mark Aguiar (Princeton University) will give a talk on Self-Ful€ling Debt Dilution: Maturity and Multiplicity in Debt Models (joint work with Manuel Amador).

Date & Time: June, 25 (Tuesday), 16.50 
Place: 3A Kantemirovskaya st., room 339

Abstract:

We establish that creditor beliefs regarding future borrowing can be self-ful€ling, leading to multiple equilibria with markedly different debt accumulation patterns. We characterize such indeterminacy in the Eaton-Gersovitz sovereign debt model augmented with long maturity bonds. Two necessary conditions for the multiplicity are: (i) the government is more impatient than foreign creditors, and (ii) there are deadweight losses from default.The multiplicity is dynamic and stems from the self-fulling beliefs of how future creditors will price bonds; long maturity bonds are therefore a crucial component of the multiplicity. We introduce a third party with deep pockets to discuss the policy implications of this source of multiplicity and identify the potentially perverse consequences of traditional “lender of last resort” policies.

No registration.
Please follow this link to our calendar: https://tinyurl.com/spbecon