Du, Wenxin; Schreger, Jesse - Federal Reserve Board (Board of Governors of the … - 2013
Do governments default on debt denominated in their own currency? We introduce a new measure of sovereign credit risk …, the local currency credit spread, defined as the spread of local currency bonds over the synthetic local currency risk …-country correlations, and are less sensitive to global risk factors. Global risk aversion and liquidity factors can explain more time …