Recent rulings in the ongoing litigation over the pari passu clause in Argentinian sovereign debt instruments have generated considerable controversy. Some official-sector participants and academic articles have suggested that the rulings will disrupt or impede future sovereign debt...

Most models currently used to determine optimal foreign reserve holdings take the level of international debt as given. However, given the sovereign's willingness-to-pay incentive problems, reserve accumulation may reduce sustainable debt levels. In addition, assuming constant debt levels does...

In the past decade, foreign participation in local-currency bond markets in emerging countries has increased dramatically. We revisit sovereign debt sustainability under the assumptions that countries can borrow internationally using their own currencies and accumulate reserves. As opposed to...

To study the joint decision of holding sovereign debt and reserves, we construct a stochastic dynamic equilibrium model that incorporates willingness-to-pay incentive problems. In this setup, debt and assets are not perfect substitutes, as reserves can be used even after a country has defaulted....

Most models currently used to determine optimal foreign reserve holdings take the level of international debt as given. However, given the sovereign's willingness-to-pay incentive problems, reserve accumulation may reduce sustainable debt levels. In addition, assuming constant debt levels does...