During the last two years, Europe has been facing a debt crisis, and Greece has been at its center. In response to the crisis, drastic actions have been taken, including the halving of Greek debt. Policy makers acted because interest rates for sovereign debt increased dramatically. High interest rates imply that default is likely due to economic conditions. High interest rates also increase the...

We develop a theory to show how mark-to-market accounting and shareholder–debt holder agency con‡icts interact to a¤ect the prudential regulation of a …nancial institution. We demonstrate that, relative to a benchmark historical cost regime, mark-to-market accounting could alleviate the ine¢ ciencies arising from asset substitution, but exacerbate those arising from the incentives to choose low...

IV. Discussion of the Guidelines .............................................................................................10 1. Debt Management Objectives and Coordination...................................................10 2. Transparency and Accountability ..........................................................................14 3. Institutional Framework.................................

This bulletin is based on research conducted by Professor Garry Barrett, Dr Kadir Atalay and Dr Rebecca Edwards at the AHURI Research Centre—The University of Sydney. The research explored the nature and magnitude of the relationship between house prices, household debt and the labour market decisions of Australian households. What impact do house prices have on household debt and labour supply...

This paper studies optimal sovereign debt policy of the government with limited commitment and compare the optimal policies in economies with and without government’s private capital control. The comparison of optimal sovereign debt policies can rationalize why more financially open market economies show more severe allocation puzzle — more negative relationship between growth and public capita...

A credit default swap (CDS) contract provides insurance against default. After a country defaults, the country and its lenders usually negotiate over the share of the defaulted debt to be repaid. This paper incorporates CDS contracts into a sovereign default model and demonstrates that the existence of a CDS market results in lower default probability, higher debt levels, and lower nancing cost...

The market for sovereign debt differs from the market for corporate debt in several important ways including the risk of opportunistic default by sovereign debtors, the importance of political pressures, and the presence of international development organizations. Moreover, countries are subject to neither liquidation nor standardized processes of debt reorganization. Instead, negotiations betw...

I propose a model of production and financing for firms in an open economy, which features financial frictions and imperfect competition in the domestic goods market. The optimal currency composition of debt comes from the motive to hedge currency exposure, which arises from the industry equilibrium in the domestic goods market. Using a panel dataset of traded Mexican firms, I find evidence tha...

0378-4266/$ see front matter 2010 Published by doi:10.1016/j.jbankfin.2010.10.017 ⇑ Corresponding author at: School of Business an Integration Studies, Trinity College Dublin, College G +353 1 8961522; fax: +353 1 6799503. E-mail addresses: [email protected] (B.M. Lucey), qzha This paper investigates the impact of country-level financial integration on corporate financing choices in emerging econom...

This paper documents predictable time-variation in the real return beta of U.S. Treasury inflation protected securities (TIPS) and in the Sharpe ratios of both indexed and conventional bonds. The conditional mean and volatility of both bonds and their conditional correlation are first estimated from predetermined variables. These estimates are then used to compute conditional real return betas ...