Essays on sovereign debt and default - OpenBU.
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In many countries, government bailouts of banking systems also contributed to an increase in public debt. Private debt turned to public debt, be it through banking crises or the burst of housing bubbles, leading to the sovereign debt crisis. Between 2007 and 2010, the debt to GDP ratio of the euro area increased from 66.3% to 85.4%.
A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full. Cessation of due payments (or receivables) may either be accompanied by formal declaration (repudiation) of a government not to pay (or only partially pay) its debts, or it may be unannounced.
Sovereign Debt: A Review Mark Aguiar, Manuel Amador. NBER Working Paper No. 19388 Issued in August 2013 NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics In this chapter, we use a benchmark limited-commitment model to explore key issues in the economics of sovereign debt.
The addition of long debt to sovereign default models has been shown in the literature to improve their quantitative success (see for example Hatchondo and Martinez, 2009), so a natural question to ask is whether this is also an important feature to capture aspects of sovereign debt restructuring outcomes. This section shows that this is indeed the case: It is important to include long-term.
CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): This paper studies how a lender’s credit insurance activities affect a sovereign borrower in an environment with moral hazard and debt renegotiation. The moral hazard problem arises from the assumption of private information where the lender cannot observe if the sovereign invested or consumed the borrowed funds.
We analyze the role of debt in persuading an entrepreneur to pay out cash flows, rather than to divert them. In the first part of the paper we study the optimal debt contract—specifically, the trade-off between the size of the loan and the repayment—under the assumption that some debt contract is optimal. In the second part we consider a more general class of (nondebt) contracts, and.