The term structure of interest rates does not adhere to the expectations hypothesis, possibly due to a risk premium. We … consider the implications of a risk premium that arises from endogenous market segmentation driven by variable inflation rates …. In the absence of autocorrelation in inflation, the risk premium is constant. If inflation is correlated, however, the …

a risk-free rate) on top of the systematic component that is common to all countries (and that is interacted with a …

This paper examines the pricing of public debt in a quantitative macroeconomic model with government default risk …. We analyze the conditions under which expected default risk premia can quantitatively rationalize sizeable spreads on … public bonds. Sovereign default risk premia turn out to emerge at either very high debt to output ratios, or if the variance …