This paper combines default, settlement, and repayment history into a unified, dynamic borrowing model of sovereign debt. The model addresses two questions: 1) how the level of debt and the income profile affect the length of time a country in default is excluded from the international credit...

This paper builds a dynamic model of borrowing and default to study the term structure of sovereign bonds in emerging markets. The borrower in the model can buy short and long bonds at contingent prices that reflect the timing of default events. The model generates a yield curve that is upward...

This paper analyzes the optimal use of fiscal policy and sovereign debt repayment as signals in an asymmetric information environment. It shows that the presence of government private information could turn an optimal full-information countercyclical fiscal policy into a pro-cyclical one that...

Is increased competition in international financial markets desirable? On the one hand, reductions in mnopoly power can be efficiency improving. On the other, increased competition may make it hard to coordinate in disciplining debtors in default. This paper presents a model that formalizes this...

Collective action clauses (CACs) are provisions specifying that a supermajority of bondholders can change the terms of a bond. We study how CACs determine governments' fiscal incentives, sovereign bond prices and default probabilities in environments with and without contingent debt and IMF...

In the last two decades, financial integration has increased dramatically across the world. At the same time, the fraction of countries in default has more than doubled. Contrary to theory, however, there appears to have been no substantial improvement in the degree of international risk...