world with liquidity crises and strategic default, we model a contracting game between international lenders and a country … reserves if the probability of liquidity shocks is high enough; however the cost of debt increases in reserves when the lenders … anticipate that the country has an incentive to default after a liquidity shock. Indeed, in the event of such a shock, we show …

credit markets, liquidity demands rise in a country's domestic banking sector, which raise the probability of bank runs and …

against liquidity shocks, which temporarily shut out the economy of short-term credit markets. Due to the presence of a …

. To account for this empirical fact, we model the optimal portfolio choice of a country that is subject to liquidity and … international lenders. Although raising debt increases the sovereign exposure to liquidity and productivity crises, the simultaneous …

dataset on economic crises after the Second World War. Results show that, in terms of the real economy, developing countries …