unhedged borrowers. This measure explicitly takes into account the indirect exchange rate risk that banks undertake when they … lend to borrowers that will not be able to repay in the event of a sharp depreciation. Such systemic risk taking is not …

these facts, we propose a simple model of sovereign risk in which debt can be traded in secondary markets. The model has two …

of change of nominal depreciation. We examine the composition of the debt as well as its level, and a variety of other …

between international financial market structure and capital flows. This paper constructs a model in which the composition of … portfolio in face of real and nominal risk. Current account deficits are financed by net capital flows which reflect … risk premiums such that the rate of return on a debtor country's gross liabilities is lower than the return on its gross …

This paper analyzes the impact of terms of trade and risk-premium shocks on a small open economy in an intertemporal … the terms of trade coupled with a permanent reduction in the risk-premium leads to pro-industrialization and a real … Dutch disease story. It occurs because reduction in the risk-premium reduces the costs of the production in the economy, and …

the European monetary integration in late 1990s, and (ii) - following the heightened default risk of Greece - the sudden …