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We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding: risk-averse lenders and lack of monetary policy...
Persistent link: https://www.econbiz.de/10012854689
more foreign-currency debt. We propose that monetary policy credibility explains the currency composition of sovereign debt … and nominal bond risks in the presence of risk-averse investors. In our model, low credibility governments inflate during … inflation, investors require risk premia on nominal debt, making nominal debt issuance costly for low credibility governments …
Persistent link: https://www.econbiz.de/10012456087
We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding: risk-averse lenders and lack of monetary policy...
Persistent link: https://www.econbiz.de/10012864086
Persistent link: https://www.econbiz.de/10011544434
This chapter is on quantitative models of sovereign debt crises in emerging economies. We interpret debt crises broadly to cover all of the major problems a country can experience while trying to issue new debt, including default, sharp increases in the spread and failed auctions. We examine the...
Persistent link: https://www.econbiz.de/10014024275
", albeit of limited size. The value of such services depends on the credibility of the central bank, which can be accumulated …
Persistent link: https://www.econbiz.de/10013170526
Persistent link: https://www.econbiz.de/10013461088
Persistent link: https://www.econbiz.de/10013188253
This paper extends the sovereign default model described in Arellano (2008) by including both domestic and foreign debts. The government issues debt and can either inflate away its domestic debt or default on its external component. Under a discretionary policy, the existence of domestic debt...
Persistent link: https://www.econbiz.de/10013109006
Persistent link: https://www.econbiz.de/10010198134