The consensus about the ability of the standard open-economy neoclassical growthmodel to account for interest-rate driven business cycles has changed over time:whereas early research concluded that business cycles are neutral to interest-rateshocks, more recent investigations suggest that these...

This paper studies a two country model with economies disaggregated into traded and non-traded sectors and in which investment goods as in practice are produced by combining inputsfrom all sectors. The model also accounts for nontraded distribution services employed in retail-ing traded goods to...

This paper analyzes the impact of limited enforceable international loanson international risk sharing and trade fluctuations in a two-country two-good endowment economy. Our specification of the punishment threat allowsthe exclusion from trade to last only finitely many periods and...

This paper provides a simple model of the rescheduling of debt following a sovereign default as a bond exchange.

We examine the interaction between foreign aid and binding borrowing constraint for arecipient country. We also analyze how these two instruments affect economic growth vianon-linear relationships. First of all, we develop a two-country, two-period trade-theoreticmodel to develop testable...

The paper explores the determinants of up-front fees on sovereign bank loans.Remuneration of bank loans is typically channelled through the floating interestbenchmark, the interest spread, and a battery of fees. There is substantial evidence of thespread paying for long-run sovereign repayment...

In this paper we analyse the comparative pricing of vanilla and GDP linkedsovereign debt. The key feature of GDP linked bonds is that their cashflowscoupons,principal or both-are linked to the evolution of the country’s nationalincome. While it has long been argued that indexing debt to...

This paper analyzes the trade-off between official liquidity provision and debtor moral hazard ininternational financial crises. In the model, crises are caused by the interaction of bad fundamentals,self-fulfilling runs and policies by three classes of optimizing agents: international...

We empirically analyse the appropriateness of indexing emerging market sovereign debt to USreal interest rates. We find that policy-induced exogenous increases in US rates raise default riskin emerging market economies, as hypothesised in the theoretical literature. However, we also findevidence...

Lack of transparency in securitization transactions significantly contributed to thesevere financial crisis of 2007–2009. To increase transparency we—based on arecent idea by Markowitz (2009)—propose an incentive compatible mechanismfor future securitization transactions: financial claims...