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An important ineffciency in sovereign debt markets is debt dilution, wherein sovereigns ignore the adverse impact of new debt on the value of existing debt and, consequently, borrow too much and default too frequently. A widely proposed remedy is the inclusion of seniority clause in sovereign...
Persistent link: https://www.econbiz.de/10013078782
Governments in Latin America have traditionally faced significant difficulties in issuing debt denominated in local currency in international markets. However, three countries in the region have recently issued this type of debt, perhaps signaling a permanent change in the manner in which Latin...
Persistent link: https://www.econbiz.de/10013094477
This paper surveys recent economic and legal literature on sovereign debt in light of the COVID-19 shock. Most of the core theoretical contributions we review across the two disciplines hinge on immunity, and the sovereign borrower’s consequent inability to commit to repay foreign creditors,...
Persistent link: https://www.econbiz.de/10013289385
In recent years, the number of countries which have borrowed in international capital markets by issuing sovereign bonds has increased substantially. For these countries, capital market access meant a de facto acknowledgement of their policy successes and improvements in their creditworthiness...
Persistent link: https://www.econbiz.de/10013317795
This paper explains why domestic debt composition in emerging economies is risky. It carries out an analysis of the determinants of 'domestic' original sin, which refers to the inability of emerging economies to borrow domestically in local currency, at long maturities and fixed interest rates....
Persistent link: https://www.econbiz.de/10013318131
We develop a theory of information spillovers in sovereign bond markets in which investors can acquire information about default risk before trading in primary and secondary markets. If primary markets are structured as multi-unit discriminatory-price auctions, an endogenous winner's curse leads...
Persistent link: https://www.econbiz.de/10013334434
This paper explores how selective default expectations affect the pricing of sovereign bonds in a historical laboratory: the German default of the 1930s. We analyze yield differentials between identical government bonds traded across various creditor countries before and after bond market...
Persistent link: https://www.econbiz.de/10014495920
This paper studies the effect of fiscal rules on debt affordability in a large set of developed and emerging market economies, using a panel data model which allows the inclusion of weakly exogenous regressors, and which deals appropriately with cross-sectional dependence. The results show a...
Persistent link: https://www.econbiz.de/10014495983
This paper studies how the presence of foreign investors in local currency sovereign debt markets contributes to the transmission of global financial conditions to emerging market economies. My estimations indicate that the higher the share of local currency government bonds held by foreign...
Persistent link: https://www.econbiz.de/10014445890
This paper studies whether IMF programs and their size affect borrowing costs by comparing the coupon of bonds issued around an IMF arrangement. By comparing bonds issued immediately before the inset of the program with bonds issued immediately after the program, we show that, on average, the...
Persistent link: https://www.econbiz.de/10014520753