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We show that sovereign debt is unsustainable if debt contracts are not supported by direct sanctions and default carries only a ban from ever borrowing in financial markets even in the presence of uninsurable risks and time-varying interest rate. This extension of Bulow and Rogoff, 1989 requires...
Persistent link: https://www.econbiz.de/10011744128
A common view of sovereign debt markets is that they are prone to multiple equilibria. We show that such multiplicity does not exist in the infinite-horizon model of Eaton and Gersovitz (1981), a widely adopted benchmark for analyses of these markets. When the value from government default is...
Persistent link: https://www.econbiz.de/10013033123
This paper explores a natural connection between fiscal multipliers and foreign holdings of public debt. Although fiscal expansions can raise domestic economic activity through various channels, they can also have crowding-out effects if the resources used to acquire public debt reduce domestic...
Persistent link: https://www.econbiz.de/10011994640
This study investigates the reaction of stock prices to sovereign debt restructurings and credit rating reviews in six frontier stock markets. The study uses the event study methodology corrected for the impact of thin trading to investigate stock market reaction to sovereign debt restructurings...
Persistent link: https://www.econbiz.de/10012993336
This chapter adopts the working assumption that it is conceivable that at some time in the future it would be in the interest of the United States to restructure its sovereign debt (i.e., to reduce the principal amount). It addresses in particular U.S. Treasury Securities. The chapter first...
Persistent link: https://www.econbiz.de/10013044466
This paper calls attention to the role of the secondary market in shortening the duration of sovereign debt renegotiation. Consider a dynamic bargaining game with incomplete information between a government and creditors. The creditors' reservation is private information, and the government...
Persistent link: https://www.econbiz.de/10013153045
This article presents a computer-assisted analysis of the first large-scale mass litigation of sovereign debt claims. Between 2002 and 2016, hundreds of lawsuits were filed against Argentina in the United States, virtually all in the Southern District of New York. Historically, litigation...
Persistent link: https://www.econbiz.de/10014081074
This paper estimates a VAR model to assess the sensitivity of U.S. Treasury yields to supply shocks that may be triggered by massive sell-offs of Treasury securities by foreign holders. The results suggest that the Treasury yield was not very susceptible to changes in supply and that if China,...
Persistent link: https://www.econbiz.de/10012890226
This paper assesses the sensitivity of U.S. Treasury yields to supply shocks that may be triggered by massive sell-offs of U.S. Treasuries. A VAR model is estimated to analyze the supply elasticity of U.S. Treasury yields over the 2000-2008 period. The results suggest that China has the...
Persistent link: https://www.econbiz.de/10013120450
This paper documents the market reaction to the introduction of the European Financial Stability Facility (EFSF) in 2010 and 2011. The effect on borrowing rates is ambiguous - Greece, Ireland, Portugal, Spain, Italy and Slovenia exhibit a decrease in rates on event days, the remaining Eurozone...
Persistent link: https://www.econbiz.de/10013109118