RIEB Seminar (Jointly supported by: Grant-in-Aid for Scientific Research (A): Deflation, Strong Yen, and Financial Crises)
| Date&Time |
Tuesday, July 15, 2014, 3:30pm- |
| Place |
Meeting Room at RIEB (Annex, 2nd Floor) |
| Intended Audience |
Faculties, Graduate Students, and People with Equivalent Knowledge |
| Language |
English |
| Note |
Copies of the paper will be available at Office of Promoting Research Collaboration. |
3:30pm-
| Speaker |
Yiannis VAILAKIS |
| Affiliation |
Adam Smith Business School, University of Glasgow /
Reseach Institute for Economics & Business Administration, Kobe University |
| Topic |
Reputation Debt and the Role of Interest Rates |
| Abstract |
In contrast to the classic result by Bulow and Rogoff (AER 1989), Hellwig and Lorenzoni (ECMA 2009) show that reputation debt--defined as the amount of debt supported merely by the threat of credit exclusion--can be sustained in a general equilibrium model because interest rates may adjust downward to reduce default incentives. The paper clarifies
the role of interest rates for debt sustainability. It also explores whether reputation debt is still sustainable in the presence of direct sanctions. |