This paper measures “debt disputes” between governments and foreign private creditors in periods of sovereign debt crises. We construct an index of government coerciveness, consisting of 9 objective sub-indicators. Each of these sub-indicators captures unilateral government actions imposed...

This paper analyzes the impact of the government debt-to-GDP ratio on the correlation of the fiscal balance and the current account. Above a government debt-to-GDP ratio of 90 percent the correlation of the two balances decreases by 0.16 in a sample of 12 euro area countries and by 0.17 for...

This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010–2014. We find that the decline...

This paper examines the extent to which large swings of sovereign yields in euro area countries during the debt crisis can be attributed to fundamentals, focusing on the inherent uncertainty in bond yield models. We show that the outcomes are strongly affected by modelling choices with regard to...

This paper simultaneously analyzes wake-up-call and pure contagion of sovereign risk in the Eurozone during its recent financial crisis. Pure contagion of sovereign risk means the transmission of negative effects after a shock to a country which are not reflected in the risk pricing of...

We address the importance of external versus domestic conditions in determining emerging market bond (EMBI) spreads. Using principal components, we derive a measure of global risk aversion, which is shown to have a significant and, when interacted with a country's foreign debt to GNI ratio,...

We distinguish two types of debt crises: those that are the outcome of exogenous shocks (to productivity growth for instance) and those that are endogenously created, either by self-fulfilling panic in financial markets or by the reckless behavior of “Panglossian” borrowers. After Krugman,...

In the last two decades, the private sector has contracted a substantially larger share in the total amount of foreign-currency international debt (private sector share of external debt), especially in developing countries. In this paper, I empirically examine the effect of this phenomenon on...

In a setting where the lender and the borrower have heterogeneous beliefs about the likelihood of a disastrous shock to the borrower's economy, we study the debt contract that defaults at the occurrence of that shock, as proposed by Barro (2006). We find that a higher belief by the lender...

We analyze how the impact of a change in the sovereign debt-to-GDP ratio on economic growth depends on the level of debt, the stress level on the financial market and the membership in a monetary union. A dynamic growth model is put forward demonstrating that debt affects macroeconomic activity...