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Working Paper
Sovereign default risk and uncertainty premia
Pouzo, Demian; Presno, Ignacio (2012)
This paper studies how foreign investors' concerns about model misspecification affect sovereign bond spreads. We develop a general equilibrium model of sovereign debt with endogenous default wherein investors fear that the probability model of the underlying state of the borrowing economy is misspecified. Consequently, investors demand higher returns on their bond holdings to compensate for the default risk in the context of uncertainty. In contrast with the existing literature on sovereign default, we explain the bond spreads dynamics observed in the data as well as other business cycle ...
Working Papers , Paper 12-11

Report
A theoretical analysis of capital flight from debtor nations
Charrette, Susan M. (1991)
Research Paper , Paper 9113

Report
When is there a strong transfer risk from the sovereigns to the corporates? Property rights gaps and CDS spreads
Bai, Jennie; Wei, Shang-Jin (2012)
When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one reason why international investment in private companies has to take into account the sovereign risk. But the likelihood of sovereign risk transferring to corporates and increasing their risk of default may be mitigated by legal institutions that provide strong property rights protection. Using a novel credit default swaps (CDS) data set covering government and corporate entities across thirty countries, we study both the average strength of the transfer risks and the role of ...
Staff Reports , Paper 579

Report
Capital flows & current account deficits in the 1990s: why did Latin America & East Asian countries respond differently?
Antzoulatos, Angelos A. (1996)
The return of private capital to highly indebted less-developed countries (LDCs) in the late 1980s was accompanied by widening current account deficits in the recipient countries, which were primarily attributed to a consumption boom in Latin America and an investment surge in East Asia. Interpreting the return as an increase in the external debt ceiling, the maximum amount that can be borrowed, this paper analyzes and compares the different response of the two regions using the conceptual framework of a borrowing-constrained agent. According to it, an increase in the debt ceiling can reduce ...
Research Paper , Paper 9610

Working Paper
Can debtor countries service their debts? Income and price elasticities for exports of developing countries
McNeilly, Caryl; Marquez, Jaime R. (1986)
Interest in income and price elasticities for international trade has increased recently because of the debt crisis that many developing countries are experiencing. Estimates of income elasticities of import demand, however, range from a low of 1.3 to a high of 4.7. Such differences have important implications for debtor and creditor countries alike. Using quarterly data for the period 1973-1981, this paper estimates income and price elasticities for non-oil imports of five major industrial countries from non-OPEC developing countries. The empirical results suggest that the income elasticity ...
International Finance Discussion Papers , Paper 277

Working Paper
Implications of the U.S. current account deficit
Howard, David H. (1989)
In 1988, the United States recorded a current account deficit of about $135 billion. The consensus forecast seems to be for little change in the current account in the near term. In this paper, the implications of the U.S. current account deficit and of the consequent buildup in U.S. external debt are examined. The analytical framework for thinking about the U.S. current account is first surveyed, and the results from the empirical literature on the causes of the deficits in the 1980s are then reported. The sustainability of the U.S. external position is discussed next. It is concluded that, ...
International Finance Discussion Papers , Paper 350

Journal Article
Statement to Congress, April 7, 1987 (exchange market developments and international debt)
Volcker, Paul A. (1987-06)
Federal Reserve Bulletin , Issue Jun , Pages 425-430

Report
Capital flight from debtor nations when labor is mobile
Charrette, Susan M. (1991)
Research Paper , Paper 9126

Working Paper
Sovereign debt, volatility, and insurance
Kletzer, Kenneth M. (2005)
External debt increases the vulnerability of indebted emerging market economies to macroeconomic volatility and financial crises. Capital account reversals often lead sovereign debt repayment crises that are only resolved after prolonged and difficult debt restructuring. Foreign indebtedness exacerbates domestic financial distress in crisis, increasing both the incidence and severity of emerging market crises. These outcomes contrast with the presumption that access to international capital markets should help countries to smooth domestic consumption and investment against macroeconomic ...
Working Paper Series , Paper 2006-05

Report
Determinants and impacts of sovereign credit ratings
Packer, Frank; Cantor, Richard (1996)
In this article, we present the first systematic analysis of the sovereign credit ratings of the two leading agencies, Moody's and Standard & Poor's (S&P). We find that the ordering of risks they imply is broadly consistent with macroeconomic fundamentals. While the agencies cite a large number of criteria in their assignment of sovereign ratings, a regression using only eight factors explains more than 90 percent of the cross-sectional variation in the ratings. In particular, a country's rating appears largely determined by its per capita income, external debt burden, inflation experience, ...
Research Paper , Paper 9608

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