Bundesbank research says sovereign default can be the best option


Default may be the best option for sovereigns facing financial collapse, according to a discussion paper published by the Deutsche Bundesbank on April 12.

Authors Klaus Adam and Michael Grill suggest in Optimal sovereign default that countries with unsustainable debt-to-GDP ratios face a trade-off between costly default and struggling to pay their bills. According to their analysis, there can be "sizeable" welfare gains from default.

"Optimal default improves the international diversification of

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