In a small open economy where a risk-averse government borrows from risk-neutral lenders using only non-contingent one-period bonds, default happens in equilibrium and happens in *recessions* -- the …
PublishedQuarterly Journal of EconomicsOnline 23 Feb 2026Published Apr 2026
This paper develops a New Keynesian small open economy model with endogenous sovereign default — the NK-Default framework — and uses it to study the interplay between monetary policy and sovereign …