Thursday, March 17, 2011

Why Official Bailouts Tend Not To Work: An Example Motivated by Greece 2010

by Christophe P. Chamley & Brian Pinto

The Economists' Voice
March 2011

Christophe Chamley of Boston University and Brian Pinto of the World Bank use recent events in Greece to illustrate that official bailouts tend not to work when countries have fundamental fiscal (‘insolvency’) problems and construct a two-period numerical example to explain why this should not come as a surprise.

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