We study sovereign debt and default policies when credit and liquidity risk are jointly determined. To account for both … market for sovereign bonds. We quantify the effect of liquidity on sovereign spreads and welfare by performing quantitative …, we find (a) that a substantial portion of sovereign spreads is due to a liquidity premium, and (b) the liquidity premium …

This paper studies under what circumstances creditworthy sovereign borrowers may be denied liquidity by rational … become self-fulfilling, and the borrower experiences a liquidity crisis. Multiple equilibria can be avoided by marketing the … loan appropriately or by developing a reputation for following good policies. Liquidity problems can also arise because of …