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Does improving creditor coordination by strengthening CACs lead to efficiency gains in the functioning of sovereign bond markets? We address this question in a model featuring both debtor moral hazard and creditor coordination under incomplete information. Conditional on default, we characterize...
Persistent link: https://www.econbiz.de/10010595069
In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure. We show within a simple model how competition for repayment between lenders may result in sovereign debt that is...
Persistent link: https://www.econbiz.de/10005504677
The recent Eurozone debt crisis has witnessed sharp decouplings in cross-country bond yields without commensurate shifts in relative fundamentals. We rationalize this phenomenon in a model wherein countries with different fundamentals are on different equilibrium paths all along, but which...
Persistent link: https://www.econbiz.de/10011084395
In 2007, countries in the euro periphery were enjoying stable growth, low deficits, and low spreads. Then the Financial crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and,...
Persistent link: https://www.econbiz.de/10011084507
To study the role of elections in financial market instability, we focus on the role of credit risk pricing during elections from 2004 to 2007 in 13 emerging market economies. We use a unique dataset of daily credit default swap (CDS) pricing, with standard macroeconomic controls, to study the...
Persistent link: https://www.econbiz.de/10010772762
We examine the determinants of external crises, focusing on the role of foreign liabilities and their composition. Using a variety of statistical tools and comprehensive data spanning 1970–2011, we find that the ratio of net foreign liabilities to GDP is a significant crisis predictor. This is...
Persistent link: https://www.econbiz.de/10011056377
The Greek debt crisis prompted EU officials to embark on a radical reconstruction of the European sovereign debt markets. Prominently featured in this reconstruction was a set of contract provisions called Collective Action Clauses, or CACs. CACs are supposed to help governments and private...
Persistent link: https://www.econbiz.de/10010666148
We investigate the pricing of ‘Brady’ bonds that are issued by the governments of five developing countries as part of debt and debt service reduction agreements. We first present a measure of credit quality that takes account of the individual features of each bond and is comparable across...
Persistent link: https://www.econbiz.de/10005114476
This chapter is on quantitative models of sovereign debt crises in emerging economies. We interpret debt crises broadly to cover all of the major problems a country can experience while trying to issue new debt, including default, sharp increases in the spread and failed auctions. We examine the...
Persistent link: https://www.econbiz.de/10014024275
This chapter surveys recent research on international financial crises. A financial crisis is characterized by a sudden, dramatic outflow of financial resources from an economy with an open capital account. This outflow may be primarily driven by the expectation of a large nominal devaluation,...
Persistent link: https://www.econbiz.de/10014025374