We examine monetary policy options for a small open economy where sovereign default might occur due to intertemporal … insolvency. Under interest rate policy and floating exchange rates the equilibrium is indetermined. Under a fixed exchange rate … the equilibrium is uniquely determined and independent of sovereign default. …

We develop a sovereign debt model with offcial and private creditors where default risk depends on both the level and … presence of long-term debt overhang, the availability of offcial funds increases the probability of default on existing debt …, although default does not trigger exclusion from private credit markets. These findings help shed light on joint default and …

We address the problem how to estimate default probabilities for sovereign countries based on market data of traded …, only few and heterogeneous default probabilities are derived, which is problematic for backtesting. To deal with this …

This paper examines the pricing of public debt in a quantitative macroeconomic model with government default risk …. Default may occur due to a fiscal policy that does not preclude a Ponzi game. When a build-up of public debt makes this … outcome inevitable, households stop lending such that the government has to default. Interest rates on government bonds …

This paper examines equilibrium determination under different monetary policy regimes when the government might default … sovereign default can affect the return on public debt. If the central bank sets the interest rate in a conventional way, the …

Department of Economics at the University of Munich in May 2015. The thesis analyses the sovereign default problem in the …