Presidential Address: Debt and Money: Financial Constraints and Sovereign Finance

摘要

Economic analyses of corporate finance, money, and sovereign debt are largely considered separately. I introduce a novel corporate finance framing of sovereign finance based on the analogy between fiat liabilities for sovereigns and equity for corporations. The analysis focuses on financial constraints at the country level, making explicit the trade-offs involved in relying on domestic versus foreign-currency debt to finance investments or government expenditures. This framing provides new insights into issues ranging from the costs and benefits of inflation, optimal foreign exchange reserves, and sovereign debt restructuring.