Non-defaultable debt and sovereign risk

• 成果类型: Article
• 署名作者: Hatchondo, Juan Carlos; Martinez, Leonardo; Onder, Yasin Kursat
• 署名单位: Indiana University System; Indiana University Bloomington; International Monetary Fund
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2017.01.008
• 发表日期: 2017
• 页码: 217-229
• 关键词: Sovereign default; Sovereign debt; Eurobonds; Red bonds; Blue bonds; Buyback; Voluntary debt exchange; Common euro-area sovereign bonds

摘要

We quantify gains from introducing limited financing through non-defaultable debt into a model of equilibrium sovereign risk. For an initial sovereign spread of 4.2%, introducing the possibility of issuing non-defaultable debt for up to 10% of aggregate income reduces immediately the spread to 1.5%, and implies a welfare gain equivalent to a permanent consumption increase of 0.8%. Nevertheless, the spread reduction achieved by the introduction of non-defaultable debt is short lived. Our findings shed light on different aspects of proposals to introduce common euro-area sovereign bonds that could be virtually non-defaultable. (C) 2017 International Monetary Fund. Published by Elsevier B.V. All rights reserved.