We analyze how concerns for model misspecification on the part of international lenders affect the desirability of issuing state-contingent debt instruments in a standard sovereign default model a la Eaton and Gersovitz (1981). We show that for the commonly used threshold state-contingent bond...

This paper presents a continuous-time model of sovereign debt. In it, a relatively impatient sovereign government's hidden type switches back and forth between a commitment type, which cannot default, and an optimizing type, which can default at any time, and assume outside lenders have...

Using a quantitative sovereign default model, we characterize constrained efficient borrowing by a Ramsey government that commits to income-history-contingent borrowing paths taking as given ex-post optimal future default decisions. The Ramsey government improves upon the Markov government...

This paper develops a non-stochastic sovereign-debt dynamic model, with increasing cost of capital. It finds that there are parameters for which there is a stable fixed borrowing level, and there are parameters for which the model depicts the case of serial defaulters. Levels of debt that tend...

In 2016, its economy in shambles and looking to defer payment on its debts, the Venezuelan government of Nicolás Maduro proposed a multi-billion dollar debt swap to holders of bonds issued by the government's crown jewel, state-owned oil company Petroleós de Venezuela S.A. (“PDVSA”). A new...

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...