Essays on Sovereign Debt in Federations - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Essays on Sovereign Debt in Federations write by Angela Nolte. This book was released on 2012. Essays on Sovereign Debt in Federations available in PDF, EPUB and Kindle. The thesis analyses the moral hazard problem which arises in political or fiscal federations when member states anticipate being bailed out by the centre in case of financial distress. In particular, I examine whether an orderly default mechanism or deeper fiscal integration within the European Union can alleviate the soft budget constraint phenomenon and provide a solution to the sovereign debt crises engulfing the Eurozone and other parts of the world. The first essay adapts the standard Stackelberg approach of the bailout literature in order to study the effects of bankruptcy procedures on regional opportunistic behaviour. The insolvency mechanism is shaped by two parameters: the costs of default and the exemption level for public assets. The model lends support to the market discipline hypothesis if all public assets are exempt from seizure. If, by contrast, the exemption level for public assets is low, it is the central government rather than the credit market that discourages overborrowing since the former is incentivised to tax heavily indebted regions. The model's major policy insight is that an insolvency mechanism can lower the federation's welfare if it is not carefully designed. The second essay sheds light on the incentive effects of the sovereign debt restructuring mechanism which has been drafted by the Eurozone in response to the debt crisis. Employing a global game approach, the model analyses the impact of insolvency procedures on the size of the bailout, the level of effort exerted by the debtor country and EU welfare. Challenging some arguments in the policy literature, the model's major policy implication is that a half-hearted debt restructuring mechanism fails to mitigate the commitment and moral hazard problems embedded in the current EMU framework. The third essay questions the conventional wisdom that the Euro cannot survive without closer integration, using a simple political economy framework. The model compares the stability and welfare implications of the current "muddling through" scenario, an orderly default mechanism as well as a fiscal and a political union setting. Interestingly, the results suggest that the "muddling through" scenario is not more prone to break-up than the political or the fiscal union. The model's major policy recommendation is that implementing an orderly default mechanism and inserting an explicit exit clause into the European Treaties might prove more effective in preventing a Eurozone break-up than far-reaching institutional reforms.
Essays on the Politics of Sovereign Debt Markets
Essays on the Politics of Sovereign Debt Markets - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Essays on the Politics of Sovereign Debt Markets write by Rebecca Marie Nelson. This book was released on 2009. Essays on the Politics of Sovereign Debt Markets available in PDF, EPUB and Kindle. The second essay examines a government's decision to repay its debt or default. Developing countries with close ties to developed countries expect to be bailed out after default and expectations of a bailout increase the likelihood of default. Using a panel dataset of more than 100 developing countries between 1975 and 2004, I show that developing countries with political and economic ties to developed countries are more likely to default and are more likely to secure debt relief after defaulting than other developing countries. The third essay analyzes debt restructuring after default. Using a game theoretic model, I show how high domestic political costs of adjustment result in favorable restructurings. I argue that mixed regimes are particularly fragile and pay higher costs of adjustment than either full-fledged democracies or autocracies. Using a new dataset on debt reschedulings during the 1980s debt crisis, I find evidence that creditors provide favorable restructuring terms to mixed regimes. Overall, the dissertation demonstrates how specific political factors affect creditor-debtor interactions in sovereign debt markets.
Essays on Sovereign Debt Crisis
Essays on Sovereign Debt Crisis - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Essays on Sovereign Debt Crisis write by Michinao Okachi. This book was released on 2017. Essays on Sovereign Debt Crisis available in PDF, EPUB and Kindle. This thesis consists of three chapters that aim to develop economic models to explain sovereign debt crises. Chapter 2 provides the dynamic general equilibrium model of endogenous sovereign default, incorporating financial intermediaries. By a government's decision to default, government bonds become non-performing and financial intermediaries eliminate them from their net worth. While other literature on endogenous default models assumes that the default state is exogenously given, only depending on TFP or endowment, the model in Chapter 2 creates a mechanism by which the default state is contingent on the amount of debt outstanding in the non-default state. Through this feature, the model quantifies the financial amplification effect on the economy and shows the phenomenon of "Too-Big-to-Default". The model explains the important features of the Argentinean default in 2001, capturing the default frequency, the debt-to-GDP ratio and moments of main variables. Chapter 3 proposes a new sovereign debt crisis model which is applicable to an advanced country, assuming the government's incapability to serve its debts rather than willingness of repayment. The fiscal limit is defined as the sum of discounted future primary surplus under the tax rate to maximize tax revenue. When the debt outstanding exceeds the fiscal limit, the government falls into debt crisis. The economic contraction in the crisis results from the exogenous tax rate and decreased imported inputs. The model replicates the high debt-to-GDP ratio, which the endogenous model cannot assume, and captures movements of important variables of the Spanish debt crisis in around 2012. Chapter 4 introduce foreign bonds based on the model in Chapter 3, for the analysis of several countries such as Greece and Ireland in which a majority of bonds is held by foreign agents. In the model, the government issues bonds for foreign investors, and that leads the outflow of domestic output. Instead of government bonds, households adopt capital for their inter-temporal utility maximization. Also, the fiscal limit is drawn from the exogenous distribution. The simulation result for the Greek economy generally explains the contraction of its economy by the crisis in around 2012 although the effect of imported inputs is overestimated and that of domestic inputs is underestimated.
Essays on Sovereign Debt and the Macroeconomy
Essays on Sovereign Debt and the Macroeconomy - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Essays on Sovereign Debt and the Macroeconomy write by Lorenzo Prosperi. This book was released on 2019. Essays on Sovereign Debt and the Macroeconomy available in PDF, EPUB and Kindle. In this thesis, we present three papers related to sovereign debt. In the first two chapters, we study the importance of political frictions in explaining the large levels of sovereign debt to GDP observed in the data. In the third chapter, we evaluate the effects of banking regulation on sovereign exposures on macroeconomic activity. In the first chapter, we explore the channel through which political frictions generates borrowing or saving incentives in a consumption model with full commitment to debt repayment. In particular, we argue that an important and not-yet analyzed determinant of the observed heterogeneity of government debt across countries is the interaction between political conflicts and transparency of institutions. When the incumbent has preferences over the distribution of resources across different groups, in a transparent economy political uncertainty leads to pre- cautionary savings. Nevertheless, assuming that in more non-transparent economies the probability of an incumbent to be re-elected is more strongly a function of current economic conditions, then political uncertainty leads to borrowing incentives. We structurally estimate the two frictions (political conflict and lack of transparency) by using their macroeconomic implications, and we compare the estimated frictions with their proxies in the data. In the second chapter, we show that the existence of borrowing incentive generated by political frictions can generate large levels of debt to GDP, also when the agent is allowed to default on his debt. In particular, we intro- duce political uncertainty in the standard default model of Arellano2008: the incumbent has an exogenous probability of not being reelected in the next period, but in the cases when she decides to default, there is a larger probability of losing power. The calibrated model matches business cycle moments and generates realistic levels of sovereign debt in Argentina. The estimated political cost of default from the model is shown as being consistent with the decline in confidence in the Argentinian government documented around its 2001 default event. Finally, in the third chapter, we argue that favorable risk weighting on sovereign exposures induced by Basel regulation influences at the margin the composition of assets in banks' balance sheets at the cost of penalizing lending activity. To quantify the effect of the distortion induced by this regulation, we build a standard RBC model calibrated to the Euro Area economy. Increasing risk weights on government bonds has positive long-run effects and stabilization properties with respect to the business cycle. In particular, this policy makes the steady state lending spread on firm loans decline, stimulating investment and output. Moreover, it stabilizes the lending spread leading to a lower volatility of investment and output.
Essays on Sovereign Debt
Essays on Sovereign Debt - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Essays on Sovereign Debt write by Josefin Meyer. This book was released on 2019. Essays on Sovereign Debt available in PDF, EPUB and Kindle.
