1# Library to Find Best eBook for Read
Author : Sébastien Villemot
Release : 2013
Genre :
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis Essays on Modelling the Sovereign Default Risk by : Sébastien Villemot
Download or read book Essays on Modelling the Sovereign Default Risk written by Sébastien Villemot. This book was released on 2013. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Sébastien Villemot
Release : 2012
Genre :
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis Essays on Modelling the Sovereign Default Risk by : Sébastien Villemot
Download or read book Essays on Modelling the Sovereign Default Risk written by Sébastien Villemot. This book was released on 2012. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contributes to the literature on sovereign debt and default risk, building on theoretical models of strategic default and on more recent developments of the quantitative sovereign debt literature. The first contribution is to suggest a solution to the "sovereign default puzzle:" most quantitative sovereign debt models predict a default at very low debt-to-GDP thresholds, in clear contradiction with what is observed in the data. Starting from the observation that countries generally do not want to default but are rather forced into it by the markets, I present a model which can replicate the key stylized facts regarding sovereign risk. As another contribution, I establish a typology of debt crises in three categories: those crises that are the consequence of exogenous shocks, those that are self-fulfilling prophecies, and those self-enforcing crises that are the consequence of a rational tendency to over-borrow when the risk of a negative shock is high. The estimated proportion of self-fulfilling and self-enforcing crises in the data is about 10% in each case. I also study how sovereign default can be understood in the context of small open economy real business cycle models. The conclusion is that these models oscillate between two polar cases: default is either inexistent or too frequent, depending on the chosen parameter values. These models are therefore not well suited for studying sovereign risk, and default needs to be fully endogeneized in order to get meaningful results. Finally, I make a methodological contribution by presenting a new computational method for solving endogenous default models. It is shown to dramatically improve the existing speed-accuracy frontier.
Author :
Release : 2013
Genre :
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis Essays on Sovereign Default by :
Download or read book Essays on Sovereign Default written by . This book was released on 2013. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three independent essays on sovereign default. In the first chapter, I develop a quantitative general equilibrium model of sovereign default to account for spillover of default risk across countries. When the collateral constraint for investors binds due to a decrease in the value of collateral, triggered by a high default risk for one country, credit constrained investors ask for liquidity premiums even to countries with normal fundamentals. This increase in the cost of borrowing increases incentives to default for the other countries with normal fundamentals, further constraining investors in obtaining credit through a decrease in the value of collateral. The quantitative results show that this model can generate spillover of default risk across countries. The essay in the second chapter introduces endogenous capital accumulation to a quantitative model of sovereign default based on Eaton and Gersovitz (1981). With a production technology in the model, output and interest rates are jointly determined by the interaction between a sovereign government who can optimally default and foreign creditors taking into account default risk. Adding investment enables the model to generate unique economic dynamics similar to those observed around emerging economies' default crises: (1) Emerging economies' debt crises display a boom-bust pattern. (2) A non-negligible fraction of sovereign defaults occur in good times. The essay in the third chapter explains why emerging economies borrow abroad in foreign currency. We present a two-period model in which foreign lenders offer a small open economy an optimal self-enforcing contract in which borrowing is denominated in borrowers' currency. Taking into account the government's incentive to inflate away the debt, the optimal lending contract provides consumption insurance for the economy in that the contract allows the economy for inflation in bad times but asks for deflation in good times. As the variance of income shocks for the economy increases, it gets more difficult for the contract to satisfy the incentive compatible constraints at the good income state. The numerical results are consistent with the fact that emerging economies with high income volatility suffer from "Original Sin".
Author : JungJae Park
Release : 2013
Genre :
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis Essays on Sovereign Default by : JungJae Park
Download or read book Essays on Sovereign Default written by JungJae Park. This book was released on 2013. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three independent essays on sovereign default. In the first chapter, I develop a quantitative general equilibrium model of sovereign default to account for spillover of default risk across countries. When the collateral constraint for investors binds due to a decrease in the value of collateral, triggered by a high default risk for one country, credit constrained investors ask for liquidity premiums even to countries with normal fundamentals. This increase in the cost of borrowing increases incentives to default for the other countries with normal fundamentals, further constraining investors in obtaining credit through a decrease in the value of collateral. The quantitative results show that this model can generate spillover of default risk across countries. The essay in the second chapter introduces endogenous capital accumulation to a quantitative model of sovereign default based on Eaton and Gersovitz (1981). With a production technology in the model, output and interest rates are jointly determined by the interaction between a sovereign government who can optimally default and foreign creditors taking into account default risk. Adding investment enables the model to generate unique economic dynamics similar to those observed around emerging economies' default crises: (1) Emerging economies' debt crises display a boom-bust pattern. (2) A non-negligible fraction of sovereign defaults occur in good times. The essay in the third chapter explains why emerging economies borrow abroad in foreign currency. We present a two-period model in which foreign lenders offer a small open economy an optimal self-enforcing contract in which borrowing is denominated in borrowers' currency. Taking into account the government's incentive to inflate away the debt, the optimal lending contract provides consumption insurance for the economy in that the contract allows the economy for inflation in bad times but asks for deflation in good times. As the variance of income shocks for the economy increases, it gets more difficult for the contract to satisfy the incentive compatible constraints at the good income state. The numerical results are consistent with the fact that emerging economies with high income volatility suffer from "Original Sin".
Author : Ming Qiu
Release : 2019
Genre :
Kind : eBook
Book Rating : /5 ( reviews)
Book Synopsis Essays in Sovereign Debt and Default by : Ming Qiu
Download or read book Essays in Sovereign Debt and Default written by Ming Qiu. This book was released on 2019. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three papers on sovereign debt and default. Chapter 1 studies public provision of liquidity in a model of public and private linkages that allows partial sovereign default. Entrepreneurs use their holdings of domestic bonds as liquidity stock to carry out investment and the bond default risk arises from the government's trade-off between private consumption and public expenditure. The model features a feedback loop between aggregate investment and debt sustainability. An adverse productivity shock reduces the government's tax base and hence its ability to repay. The initial decrease in bond price shrinks the economy's liquidity stock and leads to more projects being liquidated. Lower tax base, in turn, reduces bond price further. Chapter 2 analyses the impact of disaster risk on risk premium of debt issued by emerging economies. I distinguish between "natural" and "economic" disasters based on the output dynamics prior to disaster occurrence. My empirical estimation results show that a sample of thirteen emerging countries are subject to economic disasters and the probabilities of disaster occurrence in those economies are positively correlated with their interest spreads. This is consistent with the theoretical prediction of a model constructed to compare economies with natural and economic disaster risks. Chapter 3 relaxes an assumption made in previous works on optimal policy that the government has perfect knowledge of states in the economy and considers a model of optimal provision of liquidity when the government only has partial information. I present solutions to the full information and partial information cases.
