This paper develops a simple model with credit rationing and endogenous default risk in which the expectation of a bailout may lead to a financial sector which is too large with respect to the the social optimum. The paper concludes with a short discussion of how this model could be used as a...

This paper surveys the recent literature on fiscal sustainability, with particular emphasis on emerging market countries. It discusses the main elements that differentiate emerging market countries from industrial countries and then discusses how probabilistic models can help to evaluate fiscal...