Optimal sovereign lending and default

• 成果类型: Article
• 署名作者: Luo, Jie; Wang, Cheng
• 署名单位: Tsinghua University; Fudan University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2018.01.006
• 发表日期: 2018
• 页码: 190-213
• 关键词: Sovereign lending; default; dynamic contracting

摘要

A model of dynamic contracting with private information is constructed to study sovereign lending and default. The model endogenizes debt exclusion and provides a theory of reentry and a theory of debt dynamics within the exclusion period. It explains why countries may end up more indebted after the exclusion period. It offers an interpretation for the mixed evidence on the correlation between default probability and indebtedness. It also explains the observed positive correlation between the duration of default and the size of haircut. (C) 2018 Elsevier B.V. All rights reserved.