News and sovereign default risk in small open economies ∗


This paper builds a model of sovereign debt in which default risk, interest rates, and level of debt depend not only on current fundamentals but also on news about future fundamentals. News shocks affect equilibrium outcomes because they contain information about the future ability of the sovereign to repay its debt. The news shocks help account for key… (More)


16 Figures and Tables

Slides referencing similar topics