Persistent gaps and default traps

• 成果类型: Article; Proceedings Paper
• 署名作者: Catao, Luis A. V.; Fostel, Ana; Kapur, Sandeep
• 署名单位: International Monetary Fund; George Washington University; University of London; Inter-American Development Bank
• 刊物名称: JOURNAL OF DEVELOPMENT ECONOMICS
• ISSN/ISSBN: 0304-3878
• DOI: 10.1016/j.jdeveco.2008.06.013
• 发表日期: 2009
• 页码: 271-284
• 关键词: sovereign debt; Serial default; Default premium; Emerging market bond spreads; asymmetric information; Output persistence

摘要

We show how vicious circles in countries' credit histories arise in a model where output persistence is coupled with asymmetric information about output shocks. In such an environment, default signals the borrower's vulnerability to adverse shocks and creates a pessimistic growth outlook. This translates into higher interest spreads and debt servicing costs relative to income, raising the cost of future repayments, thereby creating default traps. We build a long and broad cross-country dataset to show the existence of a history-dependent default premium and of significant effects of output persistence on sovereign creditworthiness, consistent with the model's predictions. (C) 2008 International Monetary Fund. Published by Elsevier B.V. All rights reserved.