Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy - 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 Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy write by Wenxin Du. This book was released on 2016. Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy available in PDF, EPUB and Kindle. Abstract: Nominal debt provides consumption-smoothing benefits if it can be inflated away during recessions. However, we document empirically that countries with more countercyclical inflation, where nominal debt provides better consumption-smoothing, issue more foreign-currency debt. We propose that monetary policy credibility explains the currency composition of sovereign debt and nominal bond risks in the presence of risk-averse investors. In our model, low credibility governments inflate during recessions, generating excessively countercyclical inflation in addition to the standard inflationary bias. With countercyclical inflation, investors require risk premia on nominal debt, making nominal debt issuance costly for low credibility governments. We provide empirical support for this mechanism, showing that countries with higher nominal bond-stock betas have significantly larger nominal bond risk premia and borrow less in local currency
Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy
Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy - 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 Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy write by Wenxin Du. This book was released on 2019. Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy available in PDF, EPUB and Kindle. We document that governments whose local currency debt provides them with greater hedging benefits actually borrow more in foreign currency. We introduce two features into a government's debt portfolio choice problem to explain this finding: risk-averse lenders and lack of monetary policy commitment. A government without commitment chooses excessively counter-cyclical inflation ex post, which leads risk-averse lenders to require a risk premium ex ante. This makes local currency debt too expensive from the government's perspective and thereby discourages the government from borrowing in its own currency.
A Primer on Managing Sovereign Debt-Portfolio Risks
A Primer on Managing Sovereign Debt-Portfolio Risks - 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 A Primer on Managing Sovereign Debt-Portfolio Risks write by Thordur Jonasson. This book was released on 2018-04-06. A Primer on Managing Sovereign Debt-Portfolio Risks available in PDF, EPUB and Kindle. This paper provides an overview of sovereign debt portfolio risks and discusses various liability management operations (LMOs) and instruments used by public debt managers to mitigate these risks. Debt management strategies analyzed in the context of helping reach debt portfolio targets and attain desired portfolio structures. Also, the paper outlines how LMOs could be integrated into a debt management strategy and serve as policy tools to reduce potential debt portfolio vulnerabilities. Further, the paper presents operational issues faced by debt managers, including the need to develop a risk management framework, interactions of debt management with fiscal policy, monetary policy, and financial stability, as well as efficient government bond markets.
Sovereign Debt Sustainability and Central Bank Credibility
Sovereign Debt Sustainability and Central Bank Credibility - 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 Sovereign Debt Sustainability and Central Bank Credibility write by Tim Willems. This book was released on 2022-01-28. Sovereign Debt Sustainability and Central Bank Credibility available in PDF, EPUB and Kindle. This article surveys the literature on sovereign debt sustainability from its origins in the mid-1980s to the present, focusing on four debates. First, the shift from an “accounting based” view of debt sustainability, evaluated using government borrowing rates, to a “model based” view which uses stochastic discount rates. Second, empirical tests focusing on the relationship between primary balances to debt. Third, debt sustainability in the presence of rollover risk. And fourth, whether government borrowing costs below rates of growth (“r
Sovereign Debt Structure for Crisis Prevention
Sovereign Debt Structure for Crisis Prevention - 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 Sovereign Debt Structure for Crisis Prevention write by Mr.Eduardo Borensztein. This book was released on 2005-01-26. Sovereign Debt Structure for Crisis Prevention available in PDF, EPUB and Kindle. The debate on government debt in the context of possible reforms of the international financial architecture has thus far focused on crisis resolution. This paper seeks to broaden this debate. It asks how government debt could be structured to pursue other objectives, including crisis prevention, international risk-sharing, and facilitating the adjustment of fiscal variables to changes in domestic economic conditions. To that end, the paper considers recently developed analytical approaches to improving sovereign debt structure using existing instruments, and reviews a number of proposals--including the introduction of explicit seniority and GDP-linked instruments--in the sovereign context.
