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The Long and the Short of It : Sovereign Debt Crises and Debt Maturity
Fernández, Raquel - 2014
We present a simple model of sovereign debt crises in which a country chooses its optimal mix of short and long-term bonds subject to standard contracting frictions: the country cannot commit to repay its debts nor to a specific path of future debt issues, and contracts cannot be made state...
Persistent link: https://www.econbiz.de/10012457880
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Fiscal and Financial Crises
Bordo, Michael D. - 2016
Interconnections between banking crises and fiscal crises have a long history. We document the long-run evolution from classic banking panics towards modern banking crises where financial guarantees are associated with crisis resolution. Recent crises feature a feedback loop between bank...
Persistent link: https://www.econbiz.de/10012456615
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The Economics of Sovereign Debt, Bailouts and the Eurozone Crisis
Gourinchas, Pierre-Olivier - 2020
Despite a formal 'no-bailout clause', we estimate significant net present value transfers from the European Union to … differences across countries. We characterize bailout size and likelihood as a function of the economic fundamentals (economic … 'Northern view' (transfers weaken fiscal discipline). While a stronger no-bailout commitment reduces risk-shifting, it may not …
Persistent link: https://www.econbiz.de/10012481598
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Optimal Bailouts in Banking and Sovereign Crises
Hur, Sewon; Sosa Padilla, César; Yom, Zeynep - National Bureau of Economic Research - 2021
We study optimal bailout policies in the presence of banking and sovereign crises. First, we use European data to …
Persistent link: https://www.econbiz.de/10012482628
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A Pyrrhic Victory? - Bank Bailouts and Sovereign Credit Risk
Acharya, Viral V. - 2011
We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy …-financial sector to fund the bailout may be inefficient since it weakens its incentive to invest, decreasing growth. Instead, the … sovereign may choose to fund the bailout by diluting existing government bondholders, resulting in a deterioration of the …
Persistent link: https://www.econbiz.de/10012461522
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Debt Fragility and Bailouts
Cooper, Russell - 2012
This paper studies debt fragility and the sharing of the resulting strategic uncertainty through ex post bailouts. Default arises in equilibrium because of both fundamental shocks and beliefs. The probability of default depends on borrowing rates and, in equilibrium, on the beliefs of lenders...
Persistent link: https://www.econbiz.de/10012460282
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Inspecting the Mechanism : Leverage and the Great Recession in the Eurozone
Martin, Philippe - 2014
We provide a comprehensive account of the dynamics of eurozone countries from 2000 to 2012. We analyze private leverage, fiscal policy, labor costs and interest rates and we propose a strategy to separate the impact of credit cycles, excessive government spending, and sudden stops. We then ask...
Persistent link: https://www.econbiz.de/10012458093
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Contagion in the European Sovereign Debt Crisis
Glover, Brent - 2014
We use a network model of credit risk to measure market expectations of the potential spillovers from a sovereign default. Specifically, we develop an empirical model, based on the recent theoretical literature on contagion in financial networks, and estimate it with data on sovereign credit...
Persistent link: https://www.econbiz.de/10012458098
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Sovereign Debt Markets in Turbulent Times : Creditor Discrimination and Crowding-Out Effects
Broner, Fernando - 2013
In 2007, countries in the euro periphery were enjoying stable growth, low deficits, and low spreads. Then the financial crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and,...
Persistent link: https://www.econbiz.de/10012458985
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Crisis and Commitment : Inflation Credibility and the Vulnerability to Sovereign Debt Crises
Aguiar, Mark - 2013
We propose a continuous time model of nominal debt and investigate the role of inflation credibility in the potential for self-fulfilling debt crises. Inflation is costly, but reduces the real value of outstanding debt without the full punishment of default. With high inflation credibility,...
Persistent link: https://www.econbiz.de/10012459147