I study the constrained efficient allocations of a simple model of risk sharing and capital flows across countries … assuming that each country cannot commit to fully repay its contract obligations. In the model, the degree of risk sharing and …

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

sample of 27 emerging economies. We find that real exchange rate depreciations tend to increase a country's risk premium … appreciations do not seem to reduce the risk premium. We also show that the main channels for the real exchange rate to affect … country risk are external and domestic balance sheet effects, stemming from the sudden increase in the stock of external or …

default risk, interest rate spreads, current account and inflation tax rates as well as and higher volatility in consumption … fiscal policy and endogenous default risk and country interest rate spreads that rationalizes these empirical findings. In a …