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This papers studies the optimal choice of sovereign debt maturity when investors are unaware of the government … priced in debt, and the size of this wedge differs with the maturity of debt. Long-term debt becomes less attractive for safe … with a shorter maturity profile – relative to the optimal choice under perfect information – and risky borrowers mimic the …
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I extend the recent quantitative models of sovereign default by allowing asymmetry in information between the government and foreign lenders. As a result, the model can account for the empirical fact that less transparent governments have higher levels of debt. Introducing information asymmetry...
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