News, sovereign debt maturity, and default risk

• 成果类型: Article
• 署名作者: Dvorkin, Maximiliano; Sanchez, Juan M.; Sapriza, Horacio; Yurdagul, Emircan
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; Universidad Carlos III de Madrid
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2020.103352
• 发表日期: 2020
• 关键词: crises; news; default; spreads; maturity; country risk; Sovereign debt

摘要

Leading into a debt crisis, interest rate spreads on sovereign debt rise before the economy experiences a decline in productivity, suggesting that news about future economic developments may play an important role in these episodes. An empirical VAR estimation shows that a news shock has a larger contemporaneous impact on sovereign credit spreads than a comparable shock to labor productivity. A quantitative model of news and sovereign debt default with endogenous maturity choice generates impulse responses and a variance decomposition similar to the empirical VAR estimates. The dynamics of the economy after a bad news shock share some features of a productivity shock and some features of sudden stop events. However, unlike during sudden stop episodes, long-term debt does not shield the country from bad news shocks, and it may even exacerbate default risk. Finally, an increase in the precision of news allows the government to improve its debt maturity management, especially during periods of high stress in credit markets, and thus face lower yield spreads while increasing the amount of debt. (C) 2020 Elsevier B.V. All rights reserved.