Sovereign Default Risk, Fiscal Adjustment, and Debt Renegotiation

Joo, Hyungseok

doi:10.2139/ssrn.2971313

Cited by 3 publications

(3 citation statements)

References 35 publications

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“…On the spending side, public investment often becomes the adjustment variable of choice when governments are unable to tax the private sector, as explained by Joo (2014).…”

Section: Related Literaturementioning

confidence: 99%

Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress

Meyer‐Cirkel¹,

Huertas²

2021

IMF Working Papers

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Sovereign debt crises are more than just a story about debt levels and primary balances. Sectoral balance sheets, and in particular the net worth of households and banks, play an important role in determining whether an episode of increased rollover risk will deteriorate into full-blown default. This paper characterizes the stylized facts surrounding debt crises from 1990 to 2019: the behavior of government finances, aggregate macroeconomic variables, and the accompanying changes in the net worth of the private sector. We then use a logistic model to estimate the probability of undergoing default for a panel of 75 countries, and find that the net worth of the household and banking sectors is a significant predictor in addition to the usual flow variables included in standard debt sustainability analyses.

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“…On the spending side, public investment often becomes the adjustment variable of choice when governments are unable to tax the private sector, as explained by Joo (2014).…”

Section: Related Literaturementioning

confidence: 99%

Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress

Meyer‐Cirkel¹,

Huertas²

2021

IMF Working Papers

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“…Mendoza and Yue (2012) use β = 0.88 and R − 1 = 1%. Guimaraes (2011), Roldán-Peña (2012), Joo (2014), Gornemann (2015), Gordon and Guerrón-Quintana (2017) and Park (2017) also consider a sovereign default models with capital. All but one of them rely on similar parameter values for β and R in order to motivate borrowing in the long run.…”

Section: A New Motive To Borrow Internationallymentioning

confidence: 99%

“…2 Furthermore, by introducing capital this paper bridges the gap between the sovereign default literature and the canonical RBC model. Guimaraes (2011), Roldán-Peña (2012), Joo (2014), Gornemann (2015), Gordon and Guerrón-Quintana (2017) and Park (2017) also introduce capital into an Eaton and Gersovitz (1981) default model. I add to these paper by also modeling financial frictions and exploring how these can lead to a persistent motive to borrow and endogenous costs of default.…”

Section: Introductionmentioning

confidence: 99%

Sovereign Default, Domestic Banks and Exclusion from International Capital Markets

Thaler

2020

The Economic Journal

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Why do governments borrow internationally, why do they temporarily remain out of international financial markets after default? I develop a quantitative model of sovereign default to propose a unified answer to these questions. In the model, the government has an incentive to borrow internationally since the domestic return on capital exceeds the world interest rate, due to a friction in the banking sector. Since banks are exposed to sovereign debt, sovereign default causes a financial crisis. After default, the government chooses to reaccess international capital markets only once banks have recovered and efficiently allocate investment again. Exclusion hence arises endogenously.

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Sovereign Default, Domestic Banks and Exclusion from International Capital Markets

Thaler

2018

SSRN Journal

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Sovereign Default Risk, Fiscal Adjustment, and Debt Renegotiation

Cited by 3 publications

References 35 publications

Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress

Balance Sheets and Debt Crises – Empirical Regularities for Modern Cases of Sovereign Distress

Sovereign Default, Domestic Banks and Exclusion from International Capital Markets

Sovereign Default, Domestic Banks and Exclusion from International Capital Markets

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