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The U.S. could be the source of the global financial risk because it longs risky assets and shorts safe assets in the … international capital market. This paper builds a stylized two-country model to highlight that when the developed country's risk …-bearing capacity improves, it holds more foreign risky assets and issue more risk-free debt. The foreign country's risk …
Persistent link: https://www.econbiz.de/10013306985
that procyclicality is more pervasive in countries with higher sovereign risk and provide a model of optimal fiscal policy …
Persistent link: https://www.econbiz.de/10012126086
sovereign to corporate credit risk in Europe. A ten percent increase in sovereign credit risk raises corporate credit risk on … sovereign to corporate risk transfer …
Persistent link: https://www.econbiz.de/10013001180
The first Greek bailout on April 11, 2010 triggered a significant reevaluation of sovereign credit risk across Europe …. We exploit this event to examine the transmission of sovereign to corporate credit risk. A ten percent increase in … sovereign credit risk raises corporate credit risk on average by 1.1 percent after the bailout. The evidence is suggestive of …
Persistent link: https://www.econbiz.de/10012905606
This paper analyzes the impact of limited enforceable international loans on international risk sharing and trade … exports. In contrast to existing studies, risk sharing is low for large elasticities of substitution between the domestic and …
Persistent link: https://www.econbiz.de/10003324110
We analyse the effect of the uncertainty about the fundamentals on the probability of sudden stops of capital flows from a theoretical and empirical perspective. Our model predicts that the probability of crises increases with the uncertainty, ie. the dispersion of private signals about the true...
Persistent link: https://www.econbiz.de/10009746213
Conventional wisdom suggests that financial liberalization can help countries insure against idiosyncratic risk. There … is little evidence, however, that countries have increased risk sharing despite recent widespread financial …, financial contracts are incomplete and enforceability of debt repayment is limited. Default risk of debt contracts constrains …
Persistent link: https://www.econbiz.de/10013153048
Fluctuations in sovereign bond yields display a large global component which is associated with a rise in uncertainty. We build a model of sovereign default in which shocks to the level and to the volatility of the world interest rate help to account for this phenomenon. We calibrate the model...
Persistent link: https://www.econbiz.de/10012894231
International data suggests that fluctuations in the level and volatility of the world interest rate (as measured by the US treasury bill rate) are positively correlated with both the level and volatility of sovereign spreads in emerging economies. We incorporate an estimated time-varying...
Persistent link: https://www.econbiz.de/10012826577
This paper examines the extent to which large swings of sovereign yields in euro area countries during the sovereign debt crisis can be attributed to fundamentals. We focus on the inherent uncertainty in bond yield models, which is often overlooked in the literature. We show that the outcomes...
Persistent link: https://www.econbiz.de/10013073359