Author(s): Fonseca, Luis Pedro Ermida Vinha
Date: 2012
Persistent ID: http://hdl.handle.net/10362/16035
Origin: Repositório Institucional da UNL
Subject(s): Fiscal adjustments; Sovereign default; War of attrition; Argentina; Domínio/Área Científica::Ciências Sociais::Economia e Gestão
This paper extends the model of Spolaore (2004) about adjustments in di erent government systems for the context of scal adjustments and sovereign default. We introduce asymmetry between groups in income and preferences towards scal reforms. Default a ects di erently each group and becomes a possibility if reforms are not enacted after public nance solvency shocks, in uencing the political game according to its likelihood. With the extensions, new situations which were not possible with the previous framework arise. After the exposition of the model, the Argentine default in 2001 provides an example of the political con icts addressed by the model.
