Replication package for: "Bailout Dynamics in a Monetary Union" by Michal Kobielarz

The Eurozone bailouts comprised credit lines with low interest rates and long maturity. The favorable lending conditions are equivalent to countries receiving implicit fiscal transfers and are often interpreted as meant to prevent a default in the Eurozone or resolve the crisis.

Contrary to this narrative, Greece defaulted on its debt and went through a deep and prolonged recession, despite receiving fiscal assistance. This paper analyzes country bailouts in a monetary union within a framework where sovereign default and exit from the union are two separate decisions. The studied bailouts prevent an exit and, thus, do not exclude subsequent defaults.