News and sovereign default risk in small open economies

• 成果类型: Article
• 署名作者: Durdu, C. Bora; Nunes, Ricardo; Sapriza, Horacio
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2013.04.002
• 发表日期: 2013
• 页码: 1-17
• 关键词: Sovereign default risk; news shocks; endogenous borrowing constraints

摘要

This paper builds a unified model of sovereign debt, default risk, and news shocks. News shocks improve the quantitative performance of the sovereign default model in a number of empirically-relevant dimensions. First, with news shocks, not all defaults occur during downturns. Second, the news shocks help account for key differences between developing and more developed economies: as the precision of news improves, the model predicts lower variability of consumption, less countercyclical trade balance and interest rate spreads, as well as a higher level of debt in line with more developed economies. Third, the model captures the hump-shaped relationship between default rates and the precision of news obtained from the data. Finally, the news shocks have a nonmonotonic effect on welfare. Published by Elsevier B.V.