We develop a sovereign default model with debt renegotiation in which interest-rate shocks affect default incentives through two mechanisms. The first is the standard mechanism through which higher rates tighten the budget constraint. The second rests on how risk-free rates affect lenders'...

We study the joint behavior of external debt, international reserves, and the real interest rate based on a dynamic regime-switching small open economy model that incorporates the salient features of economic crises in emerging markets. Our model allows an assessment of the two well-known...

Die internationale Finanz- und Wirtschaftskrise beeinflusste das Spannungsverhältnis zwischen Solidarität und Wettbewerb in der Europäischen Union in zweierlei Hinsicht. Zum einen drängten die Regierungen der europäischen Mitgliedstaaten darauf, ihre notleidenden Banken (aber auch...

Der vorliegende Beitrag führt einen Vergleich zwischen der bisher dominierenden Finanzierung von Schuldnerstaaten auf der einen Seite und der Insolvenz solcher Länder, verbunden mit einer Rekapitalisierung der Banken, auf der anderen Seite durch. Hierzu werden die mit den beiden Strategien...

The empirical literature on sovereign debt crises identifies the level of public debt (measured as a share of GDP) as a key variable to predict debt defaults and to determine sovereign market access. This evidence has led to the widespread use of (country-specific) debt thresholds to assess debt...

We examine the determinants of non-resident government debt ownership, accounting for domestic and external factors and financial variables during the period 2000Q2-2014Q4, focussing on a small euro area open economy: Portugal. Our results show that better fiscal positions, higher systematic...

What determines the recovery of sovereign bond holders in the face of a credit event? This paper studies empirical determinants for sovereign recovery risk. Guided by theoretically backed hypotheses we use a sample of 102 past restructurings and empirically test the relation between haircut...

Commercial databases now make available to paying clients information about the legal terms in sovereign loan contracts. This information is important to academic researchers, to policy institutions such as the International Monetary Fund, and to investors and other market actors. For a random...

How do financial markets respond to concerns over debt sustainability and the level of public debt in emerging markets? We introduce a measure of debt sustainability – the difference between the debt stabilizing primary balance and the primary balance – in an otherwise standard spread...

With a view to establishing a Capital Markets Union (CMU), efforts to integrate (private) capital markets and private risk-sharing in the European Union are underway. However, the single (capital) market will be burdened by a perennial potential threat to sovereign bond market stability in the...