Default model in Julia

This repo contains the codes of a default model in Julia. We study the benefits of introducing escape clauses into debt limit rules. These clauses mitigate the trade-off between expanding government transfers and repaying debt, that policymakers face in recessions. In adverse cycles, the government can issue more debt to sustain government transfers and debt payments, reducing both the probability of default and the sovereign spread. The benefits of escape clauses are present even when these are not active.

Description of files

• Parameters.ipynb: definition of parameters and declaration of arrays
• VFI.ipynb: model solution
• Simulation.ipynb: model simulation
• fun_plots.ipynb: auxiliary functions for plots
• fun_procedures.ipynb: auxiliary functions
• Main.ipynb: solution of the models and main results