The average cost of borrowing on international financial markets varies widely from nation to nation even after controlling for the varying levels of indebtedness of their governments. This suggests that markets assign country specific default risk assessments. In this paper we focus on one...

Fluctuations in sovereign bond yields display a large global component which is associated with a rise in uncertainty. We build a model of sovereign default in which shocks to the level and to the volatility of the world interest rate help to account for this phenomenon. We calibrate the model...

International data suggests that fluctuations in the level and volatility of the world interest rate (as measured by the US treasury bill rate) are positively correlated with both the level and volatility of sovereign spreads in emerging economies. We incorporate an estimated time-varying...

Using data from 56 nations over 45 years, we find that nations that are more likely to elect left wing governments face higher (and more volatile) sovereign spreads. To explain these facts, we build a sovereign default model in which two policymakers (left and right) alternate in power. The...