Sovereign debt as a contingent claim: a quantitative approach

• 成果类型: Article
• 署名作者: Alfaro, L; Kanczuk, F
• 署名单位: Harvard University; Universidade de Sao Paulo
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2004.02.006
• 发表日期: 2005
• 页码: 297-314
• 关键词: sovereign debt; default; Contingent claims; sustainability; volatility

摘要

We construct a dynamic equilibrium model with contingent service and adverse selection to quantitatively study sovereign debt. In the model, benefits of defaulting are tempered by higher future interest rates. For a wide set of parameters, the only equilibrium is one in which the sovereign defaults in all states; additional output losses, however, sustain equilibria that resemble the data. We show that due to the adverse selection problem, some countries choose to delay default to reduce loss of reputation. Moreover, although equilibria with no default imply greater welfare levels, they are not sustainable in highly indebted and volatile countries. (c) 2004 Elsevier B.V. All rights reserved.