Sovereign Debt and Structural Reforms

@article{Mller2015SovereignDA,
  title={Sovereign Debt and Structural Reforms},
  author={Andreas M{\"u}ller and Kjetil Storesletten and Fabrizio Zilibotti},
  journal={CEPR Discussion Paper Series},
  year={2015}
}
Motivated the European debt crisis, we construct a tractable theory of sovereign debt and structural reforms under limited commitment. The government of a sovereign country which has fallen into a recession of an uncertain duration issues one-period debt and can renege on its obligations by suffering a stochastic default cost. When faced with a credible default threat, creditors can make a take-it-or-leave-it debt haircut offer to the sovereign. The risk of renegotiation is reflected in the… 
Indebtedness, Interests, and Incentives: State-contingent Sovereign Debt Revisited
We propose an alternative instrument for managing the risk of a European sovereign debt crisis that explicitly compensates the insurance guarantor for her risk-sharing activity: European Puttable
Risk management for sovereign financing within a debt sustainability framework
The mix of instruments used to finance a sovereign is a key determinant of debt sustainability through its effect on funding costs and risks. We extend standard debt sustainability analysis to
Sovereign Debt in the 21st Century: Looking Backward, Looking Forward
How will sovereign debt markets evolve in the 21st century? We survey how the literature has responded to the Eurozone debt crisis, placing “lessons learned” in historical perspective. The crisis
Self-fulfilling debt crises, fiscal policy and investment
  • C. Galli
  • Economics
    Journal of International Economics
  • 2021
Sovereign Default Risk and Firm Heterogeneity
This paper measures the output costs of sovereign risk by combining a sovereign debt model with firm- and bank-level data. In our framework, an increase in sovereign risk lowers the price of
Bailouts, Inflation, and Risk-Sharing in Monetary Unions
This paper presents a new rationalization for bailouts of sovereign debt in monetary unions, such as those observed during the recent Euro crisis. It introduces a model where member countries of the
Sovereign Risk Contagion
We develop a theory of sovereign risk contagion based on financial links. In our multi-country model, sovereign bond spreads comove because default in one country can trigger default in other
Dealing with Systemic Sovereign Debt Crises: Fiscal Consolidation, Bail-Ins, or Bail-Outs?
The paper presents a tractable model to understand how international financial institutions (IFIs) should deal with the sovereign debt crisis of a systemic country, in which case private creditors’
...
1
2
3
...

References

SHOWING 1-10 OF 143 REFERENCES
Investment Cycles and Sovereign Debt Overhang
We characterize optimal taxation of foreign capital and optimal sovereign debt policy in a small open economy where the government cannot commit to policy and seeks to insure a risk averse domestic
On the optimal design of a Financial Stability Fund
A financial stability fund set by a union of sovereign countries (e.g. the European Stability Mechanism), can improve countries's ability to borrow and lend, and to share risks, with respect to debt
Gambling for redemption and self-fulfilling debt crises
We develop a model for analyzing the sovereign debt crises of 2010–2013 in the Eurozone. The government sets its expenditure–debt policy optimally. The need to sell large quantities of bonds every
Recovery Before Redemption: A Theory of Delays in Sovereign Debt Renegotiations
Negotiations to restructure sovereign debts are protracted, taking on average almost 8 years to complete. In this paper we construct a new database (the most extensive of its kind covering ninety
Sovereign Debt Relief and its Aftermath
This paper studies sovereign debt relief in a long-term perspective. We quantify the relief achieved through default and restructuring in two distinct samples: 1920-1939, focusing on the defaults on
A Distant Mirror of Debt, Default, and Relief
We take a first pass at quantifying the magnitudes of debt relief achieved through default and restructuring in two distinct samples: 1979-2010, focusing on credit events in emerging markets, and
Efficient Sovereign Default
In this article, I show that the key aspects of sovereign debt crises can be rationalized as part of the efficient risk-sharing arrangement between a sovereign borrower and foreign lenders in a
Sovereign Debt Sustainability in Advanced Economies
We develop a measure of maximum sustainable government debt for advanced economies. How much investors are willing to lend to a country's government depends on the country's expected primary surplus,
...
1
2
3
4
5
...