Context: Technical debt is a software engineering metaphor, referring to the eventual financial consequences of trade-offs between shrinking product time to market and poorly specifying, or implementing a software product, throughout all development phases. Based on its inter-disciplinary nature, i.e. software engineering and economics, research on managing technical debt should be balanced bet...

This paper considers a small open economy where government pursues debt targeting policy. In this setting, I find the optimal debt targeting rule crucially hinges on the assumption of bond market structure, i.e. whether household can purchase state-contingent bond. In addition, the country’s foreign asset holding and government’s debt level may have substantial impact on the optimal debt target...

The fixed income (FI) market is a financial market where debt securities are traded commonly in the form of bonds. Unlike equity securities which are traded on exchanges, the debt securities are primarily traded in over-the-counter (OTC) markets. While the use of electronic trading systems in the fixed income market is growing, the majority of the FI market is still driven by broker-dealer rela...

Illiquidity and default risk are determinants of bond spreads that models suggest vary across the term structure and across market states. But existent attempts to empirically identify the separate impact of these factors are affected by correlation between them. The Australian sovereign debt market, where the Australian government provided an explicit guarantee over semi-government debt, provi...

This paper analyzes Markovian equilibria in a model of strategic lending where (i) agents cannot commit to long term contracts, (ii) contracts are incomplete, and (iii) incumbent lenders can coordinate their actions. The structure of the credit market keeps changing over time endogenously along every equilibium path. After a sequence of bad shocks the borrower in a competitive market accumulate...

This paper develops a cross-country statistical model of debt rescheduling, and the secondary market valuation of LDC debt, which links these variables to key structural characteristics of developing countries, such as the trade regime, the degree of income inequality, and the share of agriculture in GNP. Our most striking finding is that higher income inequality is a significant predictor of a...

The aim of this paper is to provide further insights into the linkages between stock market development and economic growth. When it is not possible to distinguish between investment projects with different rates of return, market valuation of those projects is an “average value” reflecting the expected return across all investment opportunities. Consequently, as in a typical lemon’s market, hi...

Changes in aggregate household debt in the United States may contain information about the current state of the economy and may influence its future path. When a large share of household income is devoted to debt repayment, households have fewer funds available to purchase goods and services. Households with high debt levels relative to income are also more likely to default on their obligation...

In response to severe fiscal consolidation policies implemented after the Great Recession and euro area sovereign debt crisis, many have questioned effectiveness of consolidations in reducing burden public debt. This paper revisits this fundamental policy debate qualitatively quantitatively, studying conditions under which primary budget balance changes can successfully reduce government debt-t...