Internal debt crises and sovereign defaults
نویسندگان
چکیده
منابع مشابه
Internal debt crises and sovereign defaults
In this paper we provide a novel explanation of debt crises in emerging markets. In our model, crises arise because of the inability to punish private debtors when many of them default at the same time. We construct an optimal contracting model in which a successful entrepreneur repays the domestic lender yet an unsuccessful one defaults and liquidates his assets. However, the inability to liqu...
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a r t i c l e i n f o Sovereign debt crises in emerging markets are usually associated with liquidity and banking crises. The conventional view is that the domestic turmoil is the consequence of foreign retaliation, although there is no clear empirical evidence on " classic " default penalties. This paper emphasizes, instead, a direct link between sovereign defaults and liquidity crises buildin...
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Sovereign debt spreads occasionally exhibit sharp, large spikes in spreads over riskfree bonds. We document that these movements are only weakly correlated with movements in domestic output and are frequently followed by reductions in the face value of debt outstanding. Motivated by this evidence, we propose a quantitative model with long-term bonds and three sources of risk: fluctuations in th...
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The new markets for credit derivatives allow for buying protection on sovereign debt. This paper considers the implications for sovereign debt crises. We show that the availability of credit protection lowers ex-ante debtor moral hazard by allowing a bondholder to improve his bargaining position in negotiations with the sovereign, thus forcing the sovereign to internalize more of the costs of a...
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This paper analyses the European financial crisis through the lens of the sovereign bond liquidity. Using novel data we show that government securities are the prime collateral in the European repo market, which is becoming a primary source of funding for the banking system in the Euro area. We document that the repo haircuts on peripheral government bonds sharply increased during the crisis, r...
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ژورنال
عنوان ژورنال: Journal of Monetary Economics
سال: 2014
ISSN: 0304-3932
DOI: 10.1016/j.jmoneco.2014.03.003