We study the effects of the adoption of collective action clauses (CACs) on government bond yields by exploiting secondary market data on sovereigns quoted in international markets from March 2007 to April 2011. CACs are assessed security by security. Using a panel data approach, we find a...

This paper looks into the sovereign credit default swap (CDS) market from two perspectives. First, it analyses the relation between CDS and bond spreads. The results on a single-entity basis suggest that the CDS market leads the bond market in price discovery, especially during 2010, while both...

During the recent financial crisis developing countries have continued to accumulate both sovereign reserves and debt. To account for this empirical fact, we model the optimal portfolio choice of a country that is subject to liquidity and productivity shocks. We determine the equilibrium level...

Pre-existing public debt vulnerabilities have been exacerbated by the effects of the pandemic, raising the risk of fiscal crises in emerging markets and low-income countries. This underscores the importance of models designed to capture the main determinants of fiscal distress episodes and...

I propose a theoretical model of a debt contract between a sovereign and its international lenders that determines the optimal debt maturity structure and related costs. It is shaped by two financial frictions: limited liability (the country cannot guarantee that it will not dilute its...

Public debt levels in advanced economies have increased dramatically over recent years and they could put considerable upward pressure on market yields. Using a novel identification approach based on financial accounts and focusing on panel regressions for 18 advanced economies over the period...

Why do some states default on their debt more often than others? We argue that sovereign default is the outcome of a political struggle among different groups of citizens. It is more likely to happen if: (i) domestic debt-holders are relatively weak; (ii) the political costs of the financial...

We simulate the macroeconomic and welfare implications of different fiscal consolidation scenarios in Italy using a medium scale two-areas dynamic general equilibrium currency-union model. Differently from similar models, ours is rich in the terms of fiscal features. We assume distortionary...

We conduct an empirical analysis of sovereign bond spreads for a selected number of euro area countries. We analyze several methodologies to measure and to assess the relative importance of three components of sovereign spreads: credit premia, liquidity premia and convenience yields. We find...