What will happen if Italy is not able to implement structural reforms and if international institutions, such as the EFSF and the IMF, do not intervene with sufficient resources to prevent Europe's second-largest economy from defaulting on its debt? The potential costs of such a scenario are, as...

All of the chapters in this volume represent the cutting edge of thinking about sovereign debt. The contributions stem from the authors' deep expertise in the subject matter. Almost all of the contributions are based on formal academic research conducted in the last two years. Accordingly, this...

This paper proposes a new methodology for generating sovereign credit ratings. These are determined by mapping the probability that the debt-GDP ratio might exceed a maximum debt limit at some point in the future into a credit rating. The debt limit can be either ad hoc or based on the financial...

A methodology for generating sovereign credit ratings based on macroeconomic theory is proposed. This is applied to quarterly U.S. data from 1970 to 2011. Over this period the official credit rating of U.S. Treasury securities has been of the highest quality. In contrast, the model-based measure...

I analyze how lack of commitment affects the maturity structure of sovereign debt. Governments balance benefits of default induced redistribution and costs due to income losses in the wake of a default. Their choice of short- versus long- term debt affects default and rollover decisions by...

I analyze how lack of commitment affects the maturity structure of sovereign debt. Governments balance benefits of default induced redistribution and costs due to income losses in the wake of a default. Their choice of short- versus long-term debt affects default and rollover decisions by...

We assess the determinants of sovereign bond yield spreads in the period 1999-2016, considering non-conventional monetary policy measures in the Euro area. We use a 2-step approach: i) confirm (by means of model selection methods) and estimate (by means of panel techniques) the determinants of...

Studies have shown that markets may underprice sub-national governments' risk on the implicit assumption that these entities would be bailed out by their central government in case of financial difficulties. However, the question of whether sovereigns pay a premium on their own borrowing as a...

The paper aims to present some risks and consequences of the indebtedness of an economy. The article is based on the results of a research project and it describes the negative effects of a high level of indebtedness of an economy, the elements that influence the risks of an economy's...

What is the role of fiscal variables for the assessment of sovereign credit risk? Has this role changed over time? In the face of the financial crisis many OECD countries have experienced large increases of government debt relative to GDP. This has triggered a distinct response of financial...