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This paper proposes a model of sovereign default that features interest rate multiplicity driven by rollover risk. Our … reinforces the rollover risk. By exploiting complementarity between the traditional notions of slow- and fast-moving crises, our …
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dividends next period as ambiguous. We calibrate the agent's ambiguity aversion to match only the first moment of the risk …
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extended model with an infinite horizon, idiosyncratic risk and more realistic assumptions is used to demonstrate the general …
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Financial markets are central to the transmission of uncertainty shocks. This paper documents a new aspect of the interaction between the two by showing that uncertainty shocks have radically different macroeconomic implications depending on the state financial markets are in when they occur....
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