Why do countries tend to repay their domestic and external debt, even though the legal enforcement of the sovereign debt contract is limited? Contrary to conventional wisdom, we argue that temporary market exclusion after default is costly. When the domestic financial market is characterized by...

Ausgelöst durch das Zusammentreffen niedriger Zinsen in reichen Ländern und einem hohen Finanzierungsbedarf für Infrastruktur in vielen ärmeren Ländern befindet sich die Verschuldung der Länder des Globalen Südens seit Jahren auf einem dramatisch hohen Niveau. Hohe Schuldendienstzahlungen...

We provide a novel empirical analysis of the South Korean economy that reveals large volumes of excess or 'unproductive' credit since the late 1970s, indicating that a sizeable proportion of total credit was used to refinance unprofitable projects. Our findings are consistent with the hypotheses...

Governments in Latin America have traditionally faced significant difficulties in issuing debt denominated in local currency in international markets. However, three countries in the region have recently issued this type of debt, perhaps signalling a permanent change in the manner in which Latin...

Most of the Eastern European countries are burdened by heavy foreign debts. Securitization could be helpful in solving the vexing problem of servicing the debt of Eastern European countries and improving their financial situation. Three formats for securitizing the loans are broadly available....

The financial impact of the global crisis on Latin America has in some respects been less severe than in previous crises. This reflects in part the development of domestic bond markets and improved net balance sheet positions of the economies, which have allowed gross capital inflow reversals to...

Domestic bond markets in Latin America have expanded significantly over the past few years. This development should help reduce the region's historical dependence on external financing. Although much progress has been made, vulnerabilities associated with refinancing risk remain and secondary...

In this essay we develop a stylized model to investigate the role of external financial liberalization in the development process of a small economy. Firstly, we show that there exists an economic development threshold under which the capital account liberalization can not occur. Secondly, we...

We study the nature of sovereign credit risk using an extensive set of sovereign CDS data. We find that the majority of sovereign credit risk can be linked to global factors. A single principal component accounts for 64 percent of the variation in sovereign credit spreads. Furthermore, sovereign...