In a simple OLG model, we analyze expectations coordination on a Stationary Sunspot Equilibrium (SSE), using an ??eductive?? approach in which agents forecast the forecasting of other participants through Common Knowledge assumptions. We characterize the local stability of a SSE in terms of...

We study the relationship between default and the maturity structure of the debt portfolio of a Sovereign, under uncertainty. The Sovereign faces a trade-off between a future costly default and a high current fiscal effort. This results into a debt crisis in case a large initial issuance of long...