We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding: risk-averse lenders and lack of monetary policy...

The Commonwealth of Puerto Rico has been the center of attention as it faces mounting pressure from its unsustainable debt obligations. Puerto Rico’s current fiscal predicament is further complicated by the fact that it lacks a contractual mechanism that would help it obtain debt relief, if it...

External debt increases the vulnerability of indebted emerging market economies to macroeconomic volatility and financial crises. Capital account reversals often lead sovereign debt repayment crises that are only resolved after prolonged and difficult debt restructuring. Foreign indebtedness...

External debt increases the vulnerability of indebted emerging market economies to macroeconomic volatility and financial crises. Capital account reversals often lead sovereign debt repayment crises that are only resolved after prolonged and difficult debt restructuring. Foreign indebtedness...

Who has access to cheaper forms of borrowing: AAA-rated US corporations or developing countries? In contrast to all expectations, data from the World Bank suggests that the average spread on all forms of borrowing by developing countries is smaller than for top-rated US corporate bonds. Part of...

This chapter is on quantitative models of sovereign debt crises in emerging economies. We interpret debt crises broadly to cover all of the major problems a country can experience while trying to issue new debt, including default, sharp increases in the spread and failed auctions. We examine the...