In the 1970s, while a leftist military dictatorship ruled Peru, more than 22 million acres of cultivated or grazing farmland – one-third of Peru's total agricultural acreage, or seven-and-a-half times the land area of Connecticut – were expropriated from thousands of large owners as part of...

In this paper, we set out to examine an efficient fiscal-policy framework for a monetary union. We illustrate that fiscal policy's bias toward budget deficit only temporarily ceased at the end of the 20th century as European countries endeavored to qualify for euro-zone membership, which...

We take a first pass at quantifying the magnitudes of debt relief achieved through default and restructuring in two distinct samples: 1979-2010, focusing on credit events in emerging markets, and 1920-1939, documenting the official debt hangover in advanced economies that was created by World...

Data show that sovereign risk reduces liquidity, increases funding cost and risk of banks highly exposed to it. I build a model that rationalizes this fact. Banks act as delegated monitors and invest in risky projects and in risky sovereign bonds. As investors hear rumors of increased sovereign...

Euro area data show a positive connection between sovereign and bank risk, which increases with banks' and sovereign long run fragility. We build a macro model with banks subject to moral hazard and liquidity risk (sudden deposit withdrawals): banks invest in risky government bonds as a form of...

The last stage of the current economic crisis is mainly focused in Europe and, especially, in Portugal, Ireland, Greece and Spain. The severity of their public sector crisis could be a serious problem for the future of the Euro and the European project. As a consequence of it, sovereign bond...

What is the current state of sovereign credit risk across Euro zone? Does the recent fiscal crisis extend to other (non Euro zone) countries? Is Greece the center of the problem? How did the current fiscal crisis in the Euro area start? Who is behind it? Why can it evolve? How can it be...

In this paper we face the fitting versus forecasting paradox with the objective of realizing an optimal Early Warning System to better describe and predict past and future sovereign defaults. We do this by proposing a new Regression Tree-based model that signals a potential crisis whenever...

This paper shows that an increase in banks' holdings of domestic sovereign debt decreases the ability of domestic sovereigns to successfully enact bailouts. When sovereigns finance bailouts with newly issued debt and the price of sovereign debt is sensitive to unanticipated debt issues, then...

We dissect the information content of sovereign credit rating reports issued by Moody's in 62 countries for the period 2003–2013. Using the Naïve Bayesian machine learning algorithm, we classify all sentences in each report into positive and negative tone, as well as six informational...