the country has an incentive to default after a liquidity shock. Indeed, we show that the country may choose to retain … world with liquidity crises and strategic default, we model a contracting game between international lenders and a country … probability of liquidity shocks is high enough; however the cost of debt increases in reserves when the lenders anticipate that …

anticipate that the country has an incentive to default after a liquidity shock. Indeed, in the event of such a shock, we show … world with liquidity crises and strategic default, we model a contracting game between international lenders and a country … reserves if the probability of liquidity shocks is high enough; however the cost of debt increases in reserves when the lenders …

credit markets, liquidity demands rise in a country's domestic banking sector, which raise the probability of bank runs and …

combination of two debts to smooth consumption, which is subject to output shock and volatile tax distortions. In equilibrium, it … mostly relies on domestic debt to smooth the tax wedge and on foreign debt to smooth the output shock. Issuing either debt is …