I propose a dynamic general equilibrium model in which strategic interactions between banks and depositors may lead to endogenous bank fragility and slow recovery from crises. When banks' investment decisions are not contractible, depositors form expectations about bank risk-taking and demand a...

Is the seniority structure of sovereign debt neutral for a government's decision betweendefaulting and raising surpluses? In this paper, we address this question using a model ofdebt crises where a discretionary government endogenously chooses distortionary taxationand whether to apply an...

This paper examines the causes, processes, and outcomes of the two Belize sovereign debt restructurings in 2006–07 and in 2012–13 that occurred outside of an IMF-supported program. It finds that the motivation for the two debt restructurings differed, as the former was driven by external...

This paper investigates the impact of low or high inflation on the public debt-to-GDP ratio in the G-7 countries. Our simulations suggest that if inflation were to fall to zero for five years, the average net debt-to-GDP ratio would increase by about 5 percentage points over the next five years....

This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others. The answers relate to the unique power of the sovereign. One the one hand,...

As a response to economic crises triggered by COVID-19, sovereign debt standstill proposals emphasize debt payment suspensions without haircuts on the face value of debt obligations. We quantify the effects of standstills using a standard default model. We find that a one-year standstill...

We use a new, comprehensive data set on the sovereign debt investor base to document three novel empirical facts: (i) sovereign debt is repatriated - that is, shifted from external private to domestic investors - prior to sovereign defaults; (ii) not all crises are equal: evidence for...

This paper explores the feasibility of an idea proposed first by the German Council of Economic Experts in 2011 and revisited by Italian and French authorities in 2021: the one-off mutualization of some European legacy debt through the creation of a European Debt Management Agency (EDMA). The...

Alexander Hamilton was the first U.S. Treasury Secretary from 1789 to 1795. When he started, the Federal Government was in default. During his tenure, U.S. Treasuries became the ultimate safe asset. He successfully managed expectations, achieved debt service reduction, and stabilized financial...

Motivated by the recent European debt crisis, this paper investigates the scope for a bailout guarantee in a sovereign debt crisis. Defaults may arise from negative income shocks, government impatience or a "sunspot"-coordinated buyers strike. We introduce a bailout agency, and characterize the...