Conesa, Juan Carlos; Kehoe, Timothy Jerome - National Bureau of Economic Research - 2023
By preemptive austerity, we mean a policy that increases taxes to deter potential rollover crises. The policy is so … international lenders but is ex-post suboptimal. That is why, as it engages in preemptive austerity, the government continues to … eliminates the danger. Mechanically, high taxes make the safe zone in the model -- the set of sovereign debt levels for which the …