Endogenous political turnover and fluctuations in sovereign default risk

• 成果类型: Article
• 署名作者: Chatterjee, Satyajit; Eyigungor, Burcu
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Philadelphia
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2018.12.006
• 发表日期: 2019
• 页码: 37-50
• 关键词: Growth regimes; ELECTIONS; Sovereign default risk; Sovereign spread volatility

摘要

A sovereign default model in which the sovereign derives private benefits from public office and contests elections to stay in power is developed. The economy's growth process is modeled as a Markov switching regime, which is shown to be a better description of the data for our set of emerging economies. In the model, consistent with evidence, the sovereign is less likely to be reelected if economic growth is weak. In the low-growth regime, there is higher probability of loss of private benefits due to turnover, which makes the sovereign behave more myopically. This growth-linked variation in effective discount factor is shown to be important in generating volatility in sovereign spreads. (C) 2019 Elsevier B.V. All rights reserved.