recent Eurozone crisis. We propose a model to analyze and understand bailouts in a monetary union, and the large observed …Despite a formal ‘no-bailout clause’, we estimate significant net present value transfers from the European Union to … Cyprus, Greece, Ireland, Portugal and Spain, ranging from roughly 0.5% (Ireland) to 43% (Greece) of 2011 output during the …

incentives. We then apply our framework to the European debt crisis. We show that matching the cyclicality of public debt …

In January 1995, U.S. President Bill Clinton organized a bailout for Mexico that imposed penalty interest rates and … induced the Mexican government to reduce its debt, ending the debt crisis. Can the Troika (European Commission, European … Central Bank, and International Monetary Fund) organize similar bailouts for the troubled countries in the Eurozone? Our …

, no diabolic loop exists. In equilibrium, banks' rational expectations of a bailout ensure that no equity is issued and …

crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010, they were facing severe …

We provide a comprehensive account of the dynamics of eurozone countries from 2000 to 2012. We analyze private leverage … government spending, and sudden stops. We then ask how eurozone countries would have fared with different policies. We find that …