We show that computing business cycles in emerging economy models using the discrete state space technique may be misleading. We solve the models of sovereign default presented by Aguiar and Gopinath (2006) using interpolation. We find that the simulated behavior of the spread is quite different...

We extend the model used in recent quantitative studies of sovereign default, allowing policymakers of different types to alternate in power. We show that a default episode may be triggered by a change in the type of policymaker in office, and that such a default is likely to occur only if there...

We study the sovereign default model that has been used to account for the cyclical behavior of interest rates in emerging market economies. This model is often solved using the discrete state space technique with evenly spaced grid points. We show that this method necessitates a large number of...

We extend the model used in recent quantitative studies of sovereign default, allowing policymakers of different types to stochastically alternate in power. We show that a default episode may be triggered by a change in the type of policymaker in office, and that such a default is likely to...

We study the sovereign default model that has been used to account for the cyclical behavior of interest rates in emerging market economies. This model is often solved using the discrete state space technique with evenly spaced grid points. We show that this method necessitates a large number of...

We study the sovereign default model that has been used to account for the cyclical behavior of interest rates in emerging market economies. This model is often solved using the discrete state space technique with evenly spaced grid points. We show that this method necessitates a large number of...

This paper argues that both horizontal and intertemporal competition among recipient governments are needed in order to ensure incentives for effective utilization of targeted transfers. This has implications for budgeting frameworks and the types of information needed that might be amenable to...

This paper studies an economy with credit risk in which, as in Bizer and DeMarzo (1992), borrowers cannot commit to exclusive contracts with lenders. In contrast with Bizer and DeMarzo (1992), we study a framework with multiple borrowing periods. In particular, we remove the exclusive-contract...