Article ID Journal Published Year Pages File Type
5060757 Economics Letters 2012 4 Pages PDF
Abstract
► We study the relationship between sovereign default risk and macroeconomic volatility. ► We use a quantitative model with endogenous default risk. ► We find a non-monotonic relationship between default risk and volatility. ► This result reflects as a trade-off between prudence and the insurance value of default. ► We show that this feature also holds in the data.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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